Amazon.com (AMZN) is a long-term story. The company is taking what-would-be profits and expanding its businesses. AMZN is successful at what it does — from selling goods online to hosting websites — and therefore smart money is giving Jeff Bezos the benefit of the doubt that someday profits will come roaring in. In the next three-to-five years the could earn $10 to $15 a share. With AMZN at $264 this quarter, that’s only a P/E of 20.
But would Bezos eventually slow growth so profits can accelerate? Probably not. So this stock is going to have an enoumous P/E on the bright future the company holds. The best we can do is get some AMZN when its “down” on a technical level, like the time it fell to $220 last fall. Then just buy and hope that the stock is much higher three-to-five years from now.
One Year Chart
I want to point out 2013 annual profit estimates have fallen from $2.41 to $1.32 during the last year. The company cares so little about current results that it lost money in 2012.
Looking at the chart, AMZN seems to be in a good buy zone. But the market has been on a tear higher this year and I think AMZN could dip-down to around $225 if the market has a long-overdue correction.
Fair Value
45 times earnings is what I feel AMZN is worth, but we don’t have a way to guess at earnings. I remember reading years ago this company could make over $10 a share in profits by 2015. Now that estimate is $6.76 (and falling).
Sharek’s Take
This is a must own stock for growth investors, it would be nice to be able to buy just a little of it. But AMZN seems so high I think its prudent to wait for a great buying opportunity. I’ll look to get in AMZN around $240.
View the Earnings Table here.View the Ten Year Chart here.
