Finally - Reality Is About To Hit Amazon Shareholders
The outsiders are thinking that anybody buying this stock right now has to be insane, right? Amazon shareholders that are long at these prices are paying a 2500% premium on the tangible net worth of the assets their shares represent. Sure, there are worse examples out there, but none are even close in size and scope. At least Netflix, for all its over-blown-ness, has only sucked $10 billion worth of investor money into its stock. Amazon is sitting at over $120 billion market cap. For those who might recall how Amazon rolled over and died to the tune of 66% the last time it was at these elevated net valuations, consider it a warning shot across the bow.
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Long investors claim that Amazon can continue to just grow and grow, and P/E ratios, book value measurements, and all that lame, dusty traditional valuation stuff be damned. Who cares that, as a shareholder, I am paying $278.00 for $.075 of trailing earnings. And it doesn't matter that Q1E and Q2E for 2013 are coming in at an impressive (relative to the last two quarters, just to give you an idea of how sad this is) 30 and 32 cents per share. As an outsider looking in, it doesn't matter so much that its earnings levels are abysmal. What is most pertinent is just how much money shareholders are willing to shovel into it to get such a miniscule return. It's a growth story, right?
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