Amazon gets bearish Barron's treatment

|By:, SA News Editor

"We're making it up as we go along," says Wedbush's Michael Pachter, trying to model estimates amid Amazon's (AMZN) famous lack of detail regarding the costs of ventures like cloud-computing, Kindle, and same-day delivery of groceries. "Revenues are growing quickly so there's progress, but what are the costs for all these businesses? You tell me."

That investors give a free pass to nearly-profitless Amazon is great for consumers and bad news to the owners of companies like Netflix (NFLX), Best Buy (BBY), Staples (SPLS), RadioShack (RSH), Wal-Mart (WMT), and even Kroger (KR). But what happens to Amazon once the pass is revoked?

Analysts willing to venture a guess see earnings of $10.61 per share in 2016. To hit it, Amazon would need to continue to grow revenues at more than a 20% annual pace while expanding operating margins to 4% from 1% now. Plausible? Sure. But if the stock were to climb 10% per year over the next three, shares for the far more mature company would still trade at 40x those hopeful earnings.