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My Fears About Amazon Were Confirmed

|Includes:Amazon.com, Inc. (AMZN)

A couple weeks ago, leading up to Amazon's recent earnings release, I wrote about my mixed feelings about the company. The awe I felt at Jeff Bezos' ability to sell such a high valuation with no profits to back it gradually turned into uneasiness. Needless to say, that uneasiness was validated last week when they reported a loss of $0.27 per share on revenue of $19.34 billion. Analysts were expecting a loss of $0.15 per share on revenue of $19.34 billion.

Amazon and Bezos are seriously testing investor patience and trust. Of course, earnings aren't everything. The fact that Amazon rarely turns a profit and still manages a TTM P/E of 500 and a forward P/E of 99 is certainly evidence of that. But after 20 years, don't you think it's time to let investors take a breath, sigh, or any sort of break from this rollercoaster?

Don't get me wrong. I'm not bearish on Amazon by any means. But I do believe that it's time for Bezos to tweak the tune a little and start moving toward higher margins. Jeffrey Himelson wrote an article yesterday about a move in that direction with offering 3-D printing services. Of course, that isn't going to move the needle much and it's only a matter of time before other companies jump on that bandwagon, reducing Amazon's competitive advantage. But time will tell if Bezos goes the direction he always goes to maintain that advantage-and that's slicing margins. (Not always a bad thing, but when you do it on everything, don't expect investors to stay on the bandwagon. And don't take the advice for your personal finances).

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

Stocks: AMZN