dwot (99.54)

AMAZON is garbage

November 10, 2007 – Comments (0)

I just read a reply on the bear pitch for this stock.

 What this constant garbage about look at a stock from how many times revenue it is trading?  Seriously, this is the most useless and silly metric to base valuation on.  It could be trading a 0.2 times revenue, but it is meaningless unless the profitability is factored in.  A company trading at 0.2 times revenue is worth little if they can't generate a profit from it.

Amazon is trading at almost 100 times its earnings.  It means that its return on market cap is in the range of 1%.  That is scary, scary, scary run from it like your life depends on it financial scary in terms of how much growth the company needs to justify its market cap.

A $35 billion dollar market cap business is NOT easy to grow, yet this company needs at least 5x its earnings to justify its market cap.

What is a reasonable expectation for growth?  5% per year?  10% per year?  20% per year.  Certainly the latter is beyond optimistic and at 20% growth per year to bring this P/E down to about 20, would take 6 years.  At 10% growth it would take about TWENTY years.  A market saturated business has a hope of growing at 10% per year, NOT LIKELY...

AMAZON is a $15-20 stock AT BEST.