Gary,
I agree with you. Since we are here to make money, we should be open-minded and focus our energy and brain power on analyzing the behavior of amzn and other overvalued stocks.
AmZN is indeed overvalued. Ok, maybe insanely overvalued. But that is not the reason not to buy the stock. Before AMZN comes, there is DELL which has been criticized to be ridiculously overvalued by many people. We have also heard similar arguments, such as entry barrier to direct selling is low, the growth rate is unsustainable, etc. In the end, many people have become fabulously rich because of DELL. Dell is still here and is still overvalued. Complaining a stock to be overvalued while watching others make killings reminds me of sour grapes.
When a business is in a high-growth stage, its stock will always be overvalued. Because the market has a tendency to overshoot, some stocks become very overvalued. Since internet is dramatically simplifying economic transaction and is in its hyper-growth stage, AMZN becomes insanely overvalued.
In a word, at this stage, it is not strange to see internuts insanely overvalued.
However, there is always an end to a show. The key is, when the show comes to an end, what kind of signs should we pay attention to? Of course, the most undisputable sign comes when companies miss earnings. Before that, to miss whisper numbers, like DELL? Even before that, the slower growth rate?
Shorts tend to think when the show comes to an end, the stock will drops by 50%. That might happen, if AMZN issues earning warning or reinstate its financial report. Barring that, overvalued stocks have rarely, if not never, collapsed simply because of valuation. If I am wrong, I would love to hear the opposite.
Recently someone compares AMZN with RCA? RCA once became extremely overvalued in 1920s? How did that show come to an end? How did the stock of RCA perform before the end came? Is there someone knowledgeable about this? History usually repeats itself.
Thanks,
Steve |
