Mixed Feelings About Amazon

Aug.11.14 | About: Amazon.com, Inc. (AMZN)

Originally published on Jul 17, 2014

I have mixed feelings over Amazon (NASDAQ:AMZN) right now. You've always got bears and bulls on either side of a stock. And let's face it, Amazon is treated differently than any other stock on the market. It's true that Amazon has performed spectacularly over the past decade, but that performance hasn't exactly been revealed in any of their financial reports. So how have investors been valuing the stock? It certainly isn't based on their earnings.

And how about the P/E ratio? A 555.23 TTM and a forward P/E of 116.69-both are just insane.

At the same time, though, can you imagine a world without Amazon? The ecosystem is expanding rapidly, touching just about every aspect of our lives. And while I'm not particularly fond of the Amazon Fire Phone, it does what it's supposed to do - widens the moat around the company's core services, keeping competitors from laying siege.

But after all that, I'm still not sold on the bulls. In fact, this article by Boris Marjanovic makes the decision to buy seem a little too easy.

I wonder, though, if their financials will soon catch up to them. I'm not saying we're looking at an oversized, Twitter-like correction. But I think that investors are eventually going to tire of Bezos re-investing every single dollar the company earns on project after project with no promise that he's going to stop.

The potential is there, which is why I'm not bearish per se, but at the same time, I feel like Bezos needs to start backing himself up with some more impressive returns rather than banking on investors buying into his promises.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.