AMZN Priced for Perfection: Should Investors Worry?

NEW YORK (TheStreet) -- While I have never believed that there is such a thing as a "perfect stock," I have always remained cautious at stocks that I believed are "priced for perfection."

Investors are often quick to throw valuation metrics out of corporate windows in favor of "zeal," a quality that flies in and attaches to names such as Chipotle ( CMG) or Salesforce.com ( CRM) and to a lesser extent virtualization king VMware ( VMW). These are examples, of stocks that by virtue of their enormous trading multiples that fit the description of "priced for perfection."

As great as it is for these companies to have earned such favor and high praise from Wall Street resulting in high flying stock prices, one misstep can be severe -- if not entirely catastrophic. After all, one cannot spell "perfect" without P/E and several of these names sport ratios that offend value investors -- myself included. As fundamentally sound as e-commerce giant Amazon ( AMZN) continues to prove that it is, I have recently decided that by virtue of its P/E of 143 it now merits a ranking among the "perfect." The question is, should there now be cause for concern?

Perfect Problems

Amazon is without question one of the best tech stories today. It is a wonderful company with one of the top three visionary CEOs in Jeff Bezos. But the stock is expensive -- there is no way to spin this. I have never been a fan to the so-called "premium pricing." I will concede that it has never served as an impediment to growth stocks like Amazon. The question for "perfect stocks" has always involved the challenges with growing into the valuation.

In its Q4 report, the concern for Amazon seems to be its growing expenses and what appear to be shrinking margins. The company has always demonstrated a commitment to tackle new markets and seek growth opportunities. To that end, it had taken on facilities expansion in an effort to provide broader ranges of entertainment delivered over its new Kindle Fire tablet as well as the launching of its movie-streaming Prime service to compete with Netflix ( NFLX).

Why Amazon's Jeff Bezos Is a Genius >>

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