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Amazon's sky-high valuation

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January 08, 2013 – Comments (9) | RELATED TICKERS: AMZN

AMZN is a fantastic company that has disrupted one business after another and leveraged technology in places where most businesses didn't even know there were places.

 

Trouble is, everyone knows it, and has known it since I started watching the stock in the mid-90's.  I have watched and watched and never really felt like the stock was a good value - 'priced to perfection' is a good word for what I saw repeatedly over the years.  Of course, AMZN has consistently delivered perfection, and that's impressive, but this performance has also raised the stock's valuation to incredibly high levels, making it a poor choice for the value-conscious investor.  P/E ratio is currently near 100, where it's been hovering for years.  And it just got upgraded by some major opinion-issuing house. 

Well, I don't care about the upgrade.  A P/E of 100 for any business is too rich for me.  "But wait," you say.  "AMZN stock has continued to go up.  All those times in the last 15 years when you thought about buying the stock and didn't - you were wrong." Yes; yes, I was wrong.  And I didn't lose any money being wrong that way, either.  All things considered, I think I can live with that. 

9 Comments – Post Your Own

#1) On January 08, 2013 at 6:32 AM, portefeuille (99.60) wrote:

P/E ratio is currently near 100, where it's been hovering for years.

At the November 2008 low you could have bought AMZN with a P/E2009 of around 16.7 ($34.68/$2.08).

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#2) On January 08, 2013 at 6:44 AM, portefeuille (99.60) wrote:

P/E ≈ 33 using current share price and consensus 2015 earnings estimate, apparently :)

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#3) On January 08, 2013 at 7:28 AM, portefeuille (99.60) wrote:

http://www.wolframalpha.com/input/?i=%28market+cap+amzn+%2F+revenue+amzn%29%2F%28market+cap+wmt+%2F+revenue+wmt%29&x=0&y=0

Shows you just how cheap AMZN was in late 2008 and for most of 2001 - 2003. Give it a few seconds to calculate the chart ...

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#4) On January 08, 2013 at 7:35 AM, portefeuille (99.60) wrote:

That is by the eay what checklist34 and I (and a few others) kept telling people in 2008/2009. That quite a few stocks were "insanely cheap", even using stuff like p/e and p/b that those "value investors" kept looking at. They were simply insanely off with their earnings and book value estimates. Oh well, good old 2008/2009 "bears" ;)

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#5) On January 08, 2013 at 7:40 AM, portefeuille (99.60) wrote:

#4 see

http://caps.fool.com/Blogs/quotriskquot-and-playing/219983

http://caps.fool.com/Blogs/is-the-market-fairly-valued/320237

http://caps.fool.com/Blogs/is-the-market-undervalued-a/416179

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#6) On January 08, 2013 at 1:29 PM, Valyooo (99.55) wrote:

I agree with you which is why I never bought AMZN.

 

However, with AMZN, I am thinking the best way to value it, is based off of market cap rather than P/E.   The market cap is 120 million, about half that of walmart.  Which one do you think will be the bigger retail in 10 years? 

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#7) On January 08, 2013 at 3:40 PM, ikkyu2 (99.18) wrote:

There are a lot of stocks that looked good on March 10, 2008.  On that date I was driving down the road with $150K in the bank, earmarked for an upcoming business expansion.  I almost postponed the expansion and put the money in the market - the paperwork to do so was completed.

But eventually I decided not to.  Some days I wish I had.

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#8) On January 08, 2013 at 9:22 PM, Option1307 (29.89) wrote:

Amazon has never been my style, can't say I've ever liked that type of investment.

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#9) On May 02, 2013 at 4:44 PM, L0RDZ (82.47) wrote:

March 2008  would  have  been  a  bad  day to put  money to work  had  you  put it all to work  if  my  memory  serves  me  correct  as  I  was  just getting myself  wet  into  the markets  back  than..

March 2009  now if my  memory serves me  better  was  a  good time as  everything was  priced to  failure...  luckily I  bought  more  in 2009

Of  course  if  we can  just  see the future as  good as  we  can  see things  that have passed  oh  sure  we  can  say  if  only...

Of  course  in  order to be  in  the game  you need  first to be  able  to survive the  game  and  be  around  to be  able  to  still be  in  the game  years  later.

 

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