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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 239.06+0.4%3:59 PM EST
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To: Oeconomicus who wrote (1752)2/26/1998 6:51:00 PM
From: Tom D  Read Replies (2) of 164684
 
How to justify this stock price.

Its a bet on the future. Certainly not with current fundamental analysis ratios like P/E, P/S and EPS. Some people who post these ratios seem angry, like it is a personal insult that this stock has gotten so high.

The arguments to justify the price go like this...

1) The battle for market share is over. AMZN already won. Competitors are just going to bang their heads against the wall, losing money, until they give up. Companies like ACSES hurt AMZN's competitors more than AMZN.

2) AMZN's revenues are going to continue to surprise on the upside (as, in fact, they always have so far). Give AMZN another quarter. (Personally I expect Q1 '98 sales to exceed Q4 '97 despite the holiday effect).

3) Nobody else is willing or able to lose >$100 M on online book sales, before making profits. BKS publicly promised at a shareholders meeting last summer that they wouldn't let their online venture adversely affect their profitability.

4) Borders and Barnes & Noble use off-balance-sheet financing for the leases for their book stores. Their financial position is much weaker than the balance sheets would suggest. If AMZN skims off 10 or 20% of their revenues, the land-based book stores are going to sustain heavy losses.

5) Could somebody with $2 billion reproduce AMZN with its first-mover advantages and 80% market share?

All of us, long and short, should recognize the uniqueness of this company and its markets, and the dangers in both positions.

Best Regards to all.
I hope none of the shorts sustained any heavy damage today.
Tom D
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