This is based on its initial public offering price, initial market cap, and its current $236 share price and almost $107 billion market cap.
If the Olympics currently being held in London had a category called "Large-Cap Stock with Most Inflated Price" it's possible Amazon might win a medal. If you're an investor, this might not be a laughing matter.
Speaking of stocks that were Internet IPOs, Yahoo! (YHOO) came public around the same time as Amazon, but didn't fare so well. Today, Yahoo! has a share price of $15.98 and a market cap of less than $20 billion.It's not exactly an "apples-to-apples" comparison, but Amazon as a company is valued at almost 12 times more than Yahoo! Using this Yahoo! Finance comparative chart you get the picture, and with this chart a picture paints a thousand words. The stock market has voted with its wallet and claims Amazon.com deserves a P/E ratio (currently at 287) 16 times higher than Yahoo!'s pitiful PE of only 18. Going forward a year, the market believes Amazon deserves a P/E of nearly 84, and Yahoo! only deserves a P/E ratio of between 13 and 14. Is that rational? I know that John Maynard Keynes said, "Markets can remain irrational longer than you can remain solvent." I'm also aware of the fact that Amazon had an unusual second-quarter earnings report. Unless I misunderstood, the online retailer's earnings fell 96%, which supposedly reflected heavy investments in its business. Yes, I was impressed that revenue grew by an impressive 29% to almost $13 billion, which represents a trailing 12-month revenue-per-share of a whopping $120. In comparison, in Yahoo!'s second quarter its trailing 12-month revenue was down 1% and revenue per share was a paltry $4.05. Yahoo! quarterly earnings growth dropped 4.4%, and it has had difficulties finding and keeping a competent CEO. The jury is still out on its current choice, 37-year old Marissa A. Mayer. Amazon's shares bounced almost 8% higher on Friday after posting a higher gross margin and solidly beating its own guidance for operating income.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV