Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: ypz who wrote (64686)	6/25/1999 5:53:00 PM
From: Eric Wells	Read Replies (3) \| Respond to of 164684

ypz: Thanks for your message. I agree with you that it is difficult to determine whether AMZN is truly overvalued. My saying that it is "overvalued" is, perhaps, just as speculative as others saying that it is not overvalued. If we rely on PE ratio, and we select a target PE of 100, AMZN would require annual profits of $184 million to justify it's current stock price. If we set a target PE of 50, profits would need to be double, at $368 million. I don't believe 100 or 50 are outrageously low PEs - in fact, one could argue that even 50 or 100 is rather high for a PE. You are right in saying that all the arguments that I have brought up have been made by many others for quite some time, yet the AMZN has continued to go up over the past year. But two things have changed since last year: 1. Time has elapsed - and Amazon's losses continue to mount. As time goes by, and as some people lose money, some investors will lose patience and give up on the stock. 2. Internet stocks have demonstrated that they can go down. This time last year, the market had not yet experienced major declines in internet stocks like we have seen recently. Such recent declines have demonstrated that even internet stocks can down. Regarding the potential impact of internet taxes and competition from local bookstores: I did not mean to imply that either of these factors could do significant damage to Amazon - I meant to imply however, that they can have some negative impact on Amazon revenues - we don't know how much of a negative impact they might have. Not everyone has an office four blocks from Borders like I do - but some people do - and some people go to Borders instead of buying on Amazon. These are factors to consider, even though they certainly won't have a devastatingly negative impact on Amazon. I've never used Drugstore.com, so I can't comment on their site. Don't get me wrong, I'm a big believer in e-commerce (I help companies set up e-commerce sites for a living). I believe that Amazon will lead in certain areas in the end - whether it be online books, CDs or some other area. However, there are certain fundamental financial principals that I cannot ignore. I have trouble putting my trust in Jeff Bezos, who has never been a CEO of a company before, continually telling us that "profits are not important now". I try to imagine Bill Gates saying this to Microsoft shareholders, or Larry Ellison saying this to Oracle shareholders - and I can only think that Bill and Larry would be hounded endlessly and driven from their posts. Profits are important - they are life blood that continue to drive business - without profits, you can only stay in business for so long (until your money runs out). Even if Bezos is right in stating that profits are not important now, I believe Bezos has done a very poor job in reassuring shareholders on the manner in which profits will be forthcoming in the future. I appreciate your comments. Thanks, -Eric Wells