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

To: Glenn D. Rudolph who wrote (26383)	11/17/1998 1:12:00 PM
From: Rob S.	Read Replies (1) \| Respond to of 164684

An "internet specialist" on CNBC Market Watch compared valuations of various Internet darlings against those of "traditional" growth companies, such as Lucent and WalMart. Most of the portal companies were shown to have price to sales ratios of 50-90:1 while traditional P/S were from 1.2 to 5:1 (LU). Amazon was shown to have a P/S of about 10 to 1, and the comment was made that by Internet standards it was a great buy at current prices. What was completely ignored in this rudimentary equation was that while portals, which generate most of their revenue from selling ads, have gross margins of 75% or more and a lot of "free" advertising on their own web sites, Amazon.com has gross margins of 32% and much higher costs of doing business. Amazon pays out about 30% for advertising and promotion and fulfillment functions that are not needed by Yahoo! or Lycos. The over-simplification that P/S compare favorably for AMZN against other Internet stocks was another example of half-baked journalism. "Gee, a bag of Doritos cost a fraction of the price of caviar, they are both food, it looks like a much greater buy, time for Investors to buy a truck load to hoard for the day when you can sell stale Doritos it for $300 per ounce!"