Amazon's Popularity Gets Pricey

Investors perhaps got a little ahead of themselves with Amazon.com's(AMZN Quote) impressive first-quarter results.

Last Tuesday, the online retailer announced revenue and earnings that blew by analysts' expectations. The company also reported unexpected gains in its closely watched operating margins and said that spending on technology and content would grow at a slower pace than it did over the last year.

Shares of Amazon -- already the best-performing of the big Internet names -- soared 40% to close the week at $62.60. But after a run of nearly 70% since lows hit last August, it's difficult to see how adding another $8 billion in market capitalization this week is warranted. (The stock was recently off 1.3% to $61.76 in Monday trading).

Indeed, while Amazon's results essentially ruined the bear case for the stock -- and sent a massive amount of short-sellers running for cover -- even Amazon bulls came around to sounding a note of caution on Friday. "We believe the company is performing above even our own optimistic expectations, which would make us comfortable being buyers again in the low $50s," Stifel Nicolaus analyst Scott Devitt wrote in a note on Friday downgrading the stock to hold. Stifel Nicolaus makes a market in Amazon shares.

With a forward price-to-earnings ratio of about 53 and a price-to-earnings-to-growth ratio of 2.53, Amazon is the most richly valued big Internet company by a wide margin. Auction giant eBay(EBAY Quote), for example, trades at a forward P/E of 22 and a PEG ratio of 1.26.