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Taking a look at Amazon's (AMZN) 4Q earnings release [see call transcript] makes me feel young again. Like year-2000 bubble young. Ah the good old days....

Except they weren't all that good if you were long stocks. Maybe AMZN is too close a reminder of days gone by. There are some points that really cannot be missed, if you, the wise investor, wish to become richer over time.

Amazon did a big 4Q revenue: $21.3 billion. And that's great. However against this huge haul, the company managed to earn an income of $97 million. That's a margin so skinny it would have to gain weight to be called anorexic. By comparison, a dull bank, Wells Fargo (WFC), did about 22 billion in this 4Q, producing net income of 5.1 billion dollars. WFC struggles to earn 11x earnings on these results. But when every dollar taken in results in 23 cents coming out on the bottom line, we should probably pay attention.

Ok, one might say: a bank is not comparable. It is an old and risky business. Not interested. This is understandable, so let's compare Amazon to another big guy in the space: Wal-Mart (WMT).

Let's imagine Amazon manages to grab market share beyond all expectation and grows as big as Wal-Mart. Along the way it would put a swath of big retailers out of business, and probably require a seriously large amount of capital investment, which we will disregard at the moment.

To match Wal-Mart, AMZN would have to grow over 7 times larger than it is now. Even at the rate of 22% per year (its recent YoY improvement), that would take over 10 years to achieve. Let's further say that AMZN manages to improve operating margin a bit, to 2 percent. This performance would earn the company about $8.8 billion before taxes and interest expense. Net of those charges, let's call a net $7 billion after taxes, for an EPS of $14.89. Nice work! Now let's keep it fair, give them a premium to Wal-Mart's multiple but not an unreasonable one. Let's use 18x earnings. Investors will probably realize that unless every product purchased in the world is sold by Amazon, future growth is a touch limited.

The result of all that activity: a share price of 268 at the end of ten long years. Compared against the recent high price of 284, a lot of the excitement falls away.

Even making some stunning and rather improbable assumptions about AMZN's ability to maintain hypergrowth, and holding aside the demanding capital requirements to fund it, there is not enough meat left on the bone to feed a wise investor over the next ten years.

Don't buy at these prices and consider a short position or long term put option.

Source: Shopper Beware: Buy Anything At Amazon Except Its Stock