Amazon vs. Tesla – what are your thoughts?
Over the past 5 quarters, Amazon’s operating income has been getting decimated by inflation. The share price has been range bound for the past two years. Meanwhile, Tesla’s operating income has exploded. They’ve been range bound while their PE has compressed from over 1000 down to 180. In other words, through their impeccable execution, they’ve delivered unbelievable margins while continuing to scale. Amazon and Tesla are two companies that have been range bound for roughly the same duration. That sometimes means they’re about to make a swing in either direction. I’d put a spread trade on the two (Tesla up and amazon down) for the following reason: Tesla’s operating income has exploded sequentially for the past 5 quarters while amazons has done the exact opposite. I also think amazon is going to take a -$9 eps hit in Q1 driven by rivian and continued operating expense inflation. In Q1 ‘21 amazon hit $16 eps. This is a negative differential of -$25 eps out of the total $67 eps they made in all of 2021. And that’s after only one quarter! That means their PE ratio is set to sky rocket with limited upside growth on top line revenue. Tesla on the other hand is just starting this journey. They built the infrastructure during a period pre-inflation and are flooded with cash. In an inflationary environment, you want/need improving margins. Tesla is delivering on that while Amazon is not.
Submitted March 25, 2022 at 05:07AM by Jeffbak
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