Answering the question requires a good look at how investors - individuals, institutions, speculators, traders, big-money funds, mom & pop retirees, college student investment explorers - are likely to add their influence to the appraisal mix, near term.
While fundamental changes in the corporate and competitive arenas may well occur, current prices largely contain their presence and their potentials in the minds eyes of influential players at this poker table. Remember, it is money that moves markets.
Our help here comes from the way market-makers are hedging the risk exposures to which they must put their firm's capital in doing their jobs. Based on the way they are helping big-money fund clients get volume orders filled on Amazon (NASDAQ:AMZN) stock, and the way they purchase price protection when the firm has to get short in the process, the potential for a price of $300 is quite likely.
So in daily discussions with the trading desks of 872 institutional holders of 2/3rds of the stock - players big enough to push AMZN's price by 10% either way - these market pros think that upside could happen. How about the downside?
Using the same test, the likelihood of a 2 ½% price decline to $265 is worth buying protection for a temporary long inventory addition to the firm's "box," but with prices below that the market-making community at large is willing to self-insure.
Translation: Maybe a $245 price could happen, but it's such a long-shot that nobody with substantial capital at risk takes the possibility seriously. If a speculator wants to bet that it will, under present knowledge conditions, he/she will likely get faded very quickly by a pro on the other side of that trade.
Investors of all types have hopes and fears for their capital commitments. In the case of AMZN there is very real perplexion over prices that the market continues to support, given the apparent earnings fundamentals. But this is the real world. If one wants to deal in it, face up to the continuing reality and take your chances, intelligently.
Those chances should involve choices between investing (speculating) in AMZN, or in alternatives offering more appealing prospects, as judged by the same or equally competent appraisers.
Here are a few parallel vehicles' prospects, as seen by the same market-making community, They are Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), and Linkedin (NYSE:LNKD).
Market-maker forecasts are based on their actions for protection-needs, involving real capital exposures and real protection payments. Behavioral analysis of intelligent, involved, informed experts is at work here, supported by the only opinion that really counts, capital commitment.
The prior investment experiences are drawn from live forecasts at least as attractive as present day forecasts, inferred in real time for each stock during the past 4-5 years of daily observations, where available.
The odds for a profitable buy in AMZN here are roughly 7 out of 10, with a likely small interim discomfort and a moderately appealing rate of return prospect, based on sufficient prior experiences.
GOOG, MSFT, and AAPL at these prices and current appraisals are not competitive, either in odds or in payoffs.
But larger returns with better odds may be had in FB. Emphasis is on "maybe". Little more than a half-year of market seasoning, plus less than class-1 market management support leave room for more possible surprises, as reflected in the drawdown exposure appraisal.
Perhaps the best choice of the group is LNKD. Its strengths are in the championship batting average odds for profits and the size of past gains. Its weakness is in having only a bit more than a year and a half of forecast experiences which might not be repeated in the next year and a half.
But then, these forecasts and results all contemplate only the next 3-4 months as a holding period, after which a fresh appraisal is needed under any circumstances.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.