AMZN Priced for Perfection: Should Investors Worry?
Investors are often quick to throw valuation metrics out of corporate windows in favor of "zeal," a quality that flies in and attaches to names such as Chipotle(CMG) or Salesforce.com(CRM) and to a lesser extent virtualization king VMware(VMW) . These are examples, of stocks that by virtue of their enormous trading multiples that fit the description of "priced for perfection."
As great as it is for these companies to have earned such favor and high praise from Wall Street resulting in high flying stock prices, one misstep can be severe -- if not entirely catastrophic. After all, one cannot spell "perfect" without P/E and several of these names sport ratios that offend value investors -- myself included. As fundamentally sound as e-commerce giant Amazon(AMZN) continues to prove that it is, I have recently decided that by virtue of its P/E of 143 it now merits a ranking among the "perfect." The question is, should there now be cause for concern?
Amazon is without question one of the best tech stories today. It is a wonderful company with one of the top three visionary CEOs in Jeff Bezos. But the stock is expensive -- there is no way to spin this. I have never been a fan to the so-called "premium pricing." I will concede that it has never served as an impediment to growth stocks like Amazon. The question for "perfect stocks" has always involved the challenges with growing into the valuation.