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Amazon Stock Is Still Music to My Ears

Stocks in this article: AMZN P AAPL NFLX WMT BBY BKS FB GOOG

NEW YORK ( TheStreet) -- Not a day goes by without some analysts complaining about Amazon's (AMZN) valuation and how much the company spends each quarter. I know that tune won't change anytime soon. Those complaints helped send the stock down 9% for the year to date as of Friday's close.

Well, according to published reports, Amazon has begun discussions with record labels about a music streaming service to go along with its Prime movie streaming business.

The company wants to take on Pandora (P), Spotify and Apple's (AAPL) iTunes Radio. If this is true, you can expect an impact on Amazon's quarterly earnings -- not to mention a possible hit on margins due to the costs this would require. But so what?

The way I see it, Amazon CEO Jeff Bezos is introducing an effective marketing advantage known as bundling. To further differentiate Amazon's services, Bezos will be able to package Amazon's Prime service, its 2-day shipping, and now music streaming. All of this will be brought to you into a low-cost bundle consumers are certain to buy.

Would Netflix (NFLX) be able to compete with this service? Netflix charges $7.99 per month for (only) movies and TV shows?

Jeff Bezos is not dumb. He has killed off traditional booksellers and disrupted the entire retail space because he knows exactly what he's doing. But I'm now hearing notions that Amazon's ambitions are getting misguided. And the company's stock price is once again the major drawback.

I won't disagree that Amazon's P/E ratio of 610 pales is vast compared to, say, Apple's multiple of 13. But I also understand that to draw up valuation fears in the tech sector ... well, you might as well complain that water is wet.

Amazon's stock has always been expensive -- and the Street has never cared. It seems counterintuitive that we would begin to care about Amazon's stock now when CEO Jeff Bezos has introduced (among other things) the idea of drone-delivered packages.

Sure, earnings aren't spectacular. Margins have underwhelmed, to put it mildly. Even so, Amazon continues to grow year-over-year revenue at a 20% clip. If this performance wasn't seen as "routine" the Street would be celebrating how amazing that actually is.

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