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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- Check out the standard bear case for stocks ranging from
Amazon.com(AMZN - Get Report) to
Chipotle Mexican Grill(CMG - Get Report) to
Lululemon(LULU - Get Report). For all three, "value" investors argue that the stocks must drop because they sport lofty price-to-earnings ratios. In fact, some folks make this prediction as if it is Newtonian law.
As of Friday's close, AMZN trades at a current P/E of roughly 139 and forward P/E of about 74. CMG clocks in at approximately 62 and 39, respectively, while LULU notches a P/E of 58 in the here and now and 35 looking out one year. These three stocks, with the exception of a few very normal fits and starts, have done nothing but go up.
Two-Year, Five-Year Returns
AMZN: 30%, 204%
CMG: 231%, 535%
LULU: 256%, 426%
That's quite impressive, yet the bears remain defiant. As a popular talking point, bears compare these three companies (and others with high P/Es) to
Netflix(NFLX). They express an unconvincing certainty that what goes up must come down. They blast Jeff Bezos for spending too much, operating on "razor-thin margins" and not collecting sales tax. They wonder how the market could value a burrito joint at such a high "multiple." And they label LULU a passing fad that sells overpriced clothing to a fickle set of bored housewives. Rarely will AMZN, CMG and LULU bears listen to more holistic arguments about long-term opportunities, sound and sustainable business plans and brand loyalty between company and relatively high-end consumer.
If they listened to these and other more complex points, AMZN, CMG and LULU bears would stop using NFLX as a case study.
As I noted in
a recent article
, Amazon.com has been spending "too much" for more than a decade. Because I've covered AMZN thoroughly there and elsewhere, I focus on CMG and LULU in this article.
Both companies target a relatively affluent consumer. LULU appears to trend higher end, but, without a doubt, both largely serve the upper middle-class and higher sets who make Chipotle meals a habit and drop $100 on yoga pants on a regular basis. In different ways, Chipotle and Lululemon build brand loyalty with their core groups.