This Day On The Street
Continue to site
ADVERTISEMENT
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

Amazon Stock Is Still Music to My Ears

NEW YORK ( TheStreet) -- Not a day goes by without some analysts complaining about Amazon's (AMZN - Get Report) 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.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AMZN $535.34 0.06%
AAPL $115.04 -2.90%
FB $94.47 0.35%
GOOG $630.07 -0.18%
TSLA $263.76 1.50%

Markets

Chart of I:DJI
DOW 17,594.62 -3.58 -0.02%
S&P 500 2,097.04 -1.00 -0.05%
NASDAQ 5,107.1380 -8.2440 -0.16%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs