This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Amazon's P/E of 3,000: The Ultimate Buy Signal

In these modern times -- where we get our news, opinions and entertainment over the Internet and we no longer measure stocks using fractions -- the P/E is less a measure of valuation, more a gauge of investor confidence in things like management, the business model and the pace of and reasons for reinvestment of capital.

Sure, you'll get things like P/E contraction. Day and swing traders will have their chance to short AMZN -- like all stocks -- and make money. But, from a long-term perspective, none of this matters.

Listen to Jeff Bezos when he tells you margins don't matter to investors, free cash flow does. He's not pulling this stuff out of his ear. People with substantial money in AMZN likely have his ear.

Listen to Bezos when he tells you -- over the course of 13 to 14 years(!) -- that he does not manage the stock price. Instead, he focuses solely on visualizing his company's long-term opportunity and investing accordingly. That's what Amazon has always done, is doing now and will continue to do.

That uncomfortable P/E actually should make you quite comfortable, assuming you're a long-term investor not sensitive to noisy day-to-day or even month-to-month, quarter-to-quarter price shocks. That old-school valuation metric tells you that the big money believes this thing is poised to make good on its investment in its future.

Whereas Netflix (NFLX) to $300 in 2011 was a case of misguided Wall Street analysts propping up a house of cards, AMZN of 2012-13 absolutely is a story Wall Street got right. They're not about to be wrong anytime soon.

Amazon is fixing to dominate the world. Hard to imagine considering the level they're at now and the feeble competition. Retailers who chase the very model that crushed them by reacting with rank-and-file answers such as price matching and free popcorn.

So if you're part of this vocal minority of AMZN haters, stop it. This is not only a great company, it's a great stock led by an superb management team. Hating AMZN is as difficult for those of sound mind to comprehend as trashing Apple (AAPL).

--Written by Rocco Pendola in Santa Monica, Calif.

Stock quotes in this article: AMZN, AAPL, NFLX, LNKD 
Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,422.21 +13.67 0.08%
S&P 500 1,864.85 0.00 0.00%
NASDAQ 4,087.17 -8.3460 -0.20%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs