The whole market is full of hot air and I'm not even sure an Iraqi SCUD can bring it down
This stock is highly overvalued, yet unlikely to go lower than $45-50 per share. Why?
(1) Beszos is a Wall Street pro. You have no idea about the sort of things that a CEO can do to manage expectations and keep a stock aloft. I expect Beszos to use every trick in the book to sustain the stock price of Amazon.
(2) The large short position. If this stock drops anywhere near $45-50, you'll have crowds lining up to cover, making any down rally short lived.
(3) As long as a company posts increased revenues the markets are amazingly patient with them. For example, AOL did not post a profit for many years, yet its stock grew unabated. Granted, couple of years back there was a correction, but if you look at the chart the profitable-shorting window was only two quarters long. Anybody who shorted outside that window came out even or substantially down (in all likelihood the latter). My personal opinion is that even today AOL is overvalued, but that is irrelevant. The market values growing technology companies differently than I do.
(4) New markets. Even if this "book catalogue" concept tapers off, they can expand into CDs, and Videotapes, and apparel, and wholesale distribution agreements with independent bookstores, and content providers of book reviews, and advertising on the net, and net community.... You get the point. Amazon is positioned to take advantage of any number of internet opportunities. This will guarantee a steady stream of growing revenues, even if no profits are in sight.
Is this stock ahead of itself? You betcha! Would I touch it? No way Jose! At least not until Microsoft starts competing against them... |
