Amazon.com, Inc. (NASDAQ:AMZN), Google Inc (NASDAQ:GOOG), and Netflix, Inc. (NASDAQ:NFLX) are considered giants in the field of technology. Besides being tech entities, they are explorers of new content-distribution paradigms. I find the business models of all three intriguing, but which one of them would be best for a long-term portfolio. Let’s take a brief look at them.
Amazon – a river flowing with shareholder value
Like the Amazon River, Amazon.com is a big business model. It wants to do everything for everybody. You want a toaster to go along with that book and classic video game? Chances are you can find them on the retailer’s website.
Amazon.com, Inc. (NASDAQ:AMZN) has had quite a run over the years. I remember thinking I did well a long, long time ago when I bought shares at $16 on a Tuesday and sold them the next day at $18 (it may have been a Wednesday/Thursday combination, I can’t remember; doesn’t really matter, you get it). I should have held on. Amazon shares currently trade around $280.
Amazon.com, Inc. (NASDAQ:AMZN) is into cloud computing, content streaming, and content production. It does more than just sell stuff. It is expanding the way in which it generates top-and-bottom-line growth, and it is led by a very smart man named Jeff Bezos. Still, the stock is near a 52-week high and is considered by traditional valuation methods expensive.
According to the company’s annual report, net sales have been increasing very nicely over the last several years: it has gone from $34 billion in 2010 to $61 billion in 2012. Net income has dropped, though: while it was positive at over $1 billion, or $2.53 per diluted share, in 2010, the company reported a loss of $39 million, or $0.09 per diluted share, in 2012. Free cash flow has also declined: in 2010, $2.5 billion was generated; in 2012, the free-cash figure was $395 million.
Google – a misspelled, but awesomely-named-anyway, search engine
Googol, Google, Gaga…it doesn’t matter. Google Inc (NASDAQ:GOOG) is a great brand name. It’s a great search engine. Everyone uses it. Bing is cool too, but it’s a Google world. For now anyway.
Google Inc (NASDAQ:GOOG) has really been doing insanely awesome (wrong company, I know) during this latest bull run. The 52-week range is measured between $562 per share and $920 per share. At the time of this writing, shares could be purchased for roughly $890.
Like Amazon.com, Inc. (NASDAQ:AMZN), Google Inc (NASDAQ:GOOG) wants it all, it isn’t content with just search and ads associated with search. What did I say earlier — cloud computing, content streaming, and content production? Yep, all three. The latter two is represented by YouTube. Granted, YouTube is still evolving, but if Google has its way, that asset will be making a lot of money at some point.
Google Inc (NASDAQ:GOOG)’s annual report tells a different tale than Amazon.com, Inc. (NASDAQ:AMZN)’s. Top-line Revenue in 2010 was $29 billion; in 2012, it was $50 billion. Net income from continuing operations went from $8.5 billion, or $26.31 per diluted share, in 2010 to well over $10 billion, or $32.46 per diluted share, in 2012. Free cash flow was $7 billion in 2010 and it was $13 billion in 2012. These free-cash stats take into account cash from operations and capital expenditures; it should be noted that in 2012, there was significant acquisition spending of over $10 billion listed on the cash-flow statement.
Netflix – Amazon may be a river, but streams can be powerful too
Netflix, Inc. (NASDAQ:NFLX) used to be all about physical media. Physical media is essentially dead as an investment theme. It’s now all about streaming and other-screens. Netflix is continuing to take advantage of this transition.
Is Netflix, Inc. (NASDAQ:NFLX) a value? Will it be around years from now? Netflix delivers a compelling experience to the consumer, but the cost of content is sure to rise; Hollywood isn’t going to simply sit back and not try to take its perceived fair share of the pie. That’s the big risk: Netflix might be priced out of cost-effectiveness at some point. It’s a real concern.
The stock has been on a wild ride at times. The 52-week low is about $52 per share, the 52-week high is a little under $249. At the time of this writing, Netflix, Inc. (NASDAQ:NFLX) was trading at $218.