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One word: price.
That’s because the company falls in the top-10% of most expensive U.S. companies.
To justify its current value, Amazon would have to compound growth at 14% over 10 years. The company would also have to slow working capital growth significantly, netting its capital requirements to zero over the long run.
Amazon is still a great business: investors should expect Amazon to win massively in e-commerce, cloud computing, and digital media. A decade from now, Amazon will almost certainly still dominate the global retail industry.
But when it comes to the company’s stock, investors should keep in mind that AMZN is currently overvalued and overbought. By any conventional measure Amazon (NASDAQ:AMZN) is overvalued. With a market cap of $1.66 trillion, AMZN stock is being valued at over four times its potential 2020 revenue of $400 billion. That's based on its second quarter sales of $101 billion.
As with the other Cloud Czars — Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet, and Facebook (NASDAQ:FB) — Amazon’s current price is built on the COVID-19 market and the Fed. It’s not based on Amazon’s performance. And that is the biggest concern for price support at these high levels.
Thank you for taking the time to read and please hit like,
Ev
Sources: Investorplace
One word: price.
That’s because the company falls in the top-10% of most expensive U.S. companies.
To justify its current value, Amazon would have to compound growth at 14% over 10 years. The company would also have to slow working capital growth significantly, netting its capital requirements to zero over the long run.
Amazon is still a great business: investors should expect Amazon to win massively in e-commerce, cloud computing, and digital media. A decade from now, Amazon will almost certainly still dominate the global retail industry.
But when it comes to the company’s stock, investors should keep in mind that AMZN is currently overvalued and overbought. By any conventional measure Amazon (NASDAQ:AMZN) is overvalued. With a market cap of $1.66 trillion, AMZN stock is being valued at over four times its potential 2020 revenue of $400 billion. That's based on its second quarter sales of $101 billion.
As with the other Cloud Czars — Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet, and Facebook (NASDAQ:FB) — Amazon’s current price is built on the COVID-19 market and the Fed. It’s not based on Amazon’s performance. And that is the biggest concern for price support at these high levels.
Thank you for taking the time to read and please hit like,
Ev
Sources: Investorplace