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Nicholas Parks'  Instablog

Nicholas Parks
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I hold a Real Estate Finance degree from Texas Christian University (Go Frogs!) and a law degree from George Washington University. I am a member of the Texas Bar, though I am not an active attorney. I am a minority owner of three car dealerships, representing Ford, Dodge, Chrysler, Jeep and... More
  • Should You Wait 200 Years For A Return On Amazon? 0 comments
    Jan 11, 2013 2:51 AM | about stocks: AMZN

    Amazon (AMZN) is trading at 240 times the average of the last five years' earnings. Their best year was 2011, with earnings of $1.1 billion. At that, with a market cap of $120 billion, it's trading at over one hundred years' earnings. Fifteen years ago, analysts were arguing that Internet retailers deserved their high multiples because of their growth rates. Granted, Amazon has displayed amazing growth. Sales have nearly quadrupled in five years. However, EPS has gone from $1.12 to $1.37, and has averaged $1.71. At that rate, you can expect to earn your money back in a mere 155 years if you buy today. What happened to economies of scale increasing returns faster than revenues? When, if ever, can investors expect Amazon to focus more on profits than growth?

    I do not hold a position in Amazon (AMZN), though I'm considering a short position. But it would be my first short position ever, so it's not likely.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: Internet commerce Stocks: AMZN
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