The Bust of 2000: Did Amazon Bears Learn Anything?

NEW YORK ( TheStreet) -- While I don't expect investors to turn their backs on basics like dividend reinvestment and balance sheets, it makes sense to update your worldview from time to time.

On Monday, I argued that ( AMZN) will hit $1,000 per share before Apple ( AAPL).

Of course, many AAPL bulls responded with the standard defensiveness. That's expected; therefore, it doesn't bother me.

I'm still taken aback, however, by the responses from those who take exception, not with long-term AAPL bearishness, but any hint whatsoever of AMZN bullishness.

Here's a sampling from Twitter:
@LeoKaplin - $AMZN @jimcramer @RoccoPendola how can you justify PE > 315 for any company.. Unless they found cure for cancer
@wendland99 - @jimcramer @RoccoPendola this is assuming they make some profit, last quarter was 1% profits, what gives?

AMZN's P/E ratio is 315. AAPL's is just 16. Ford's ( F) is freaking 2. That's tough to reconcile. I completely understand.

It's almost as challenging to wrap your head around those P/Es as it is the marriage between Ric Ocasek of The Cars and the breathtaking Paulina Porizkova. And they've been together for more than 20 years.

Save the tired, "Did you learn anything in 2000?" line. Because, yes, I learned a lot.

I worked in San Francisco during the dot-com bust. I spent my days on the phone with instant IPO millionaires, VPs at companies like Extreme Networks ( EXTR) and Foundry Networks.

The experience taught me something that would have come in handy for folks holding the bag on Facebook ( FB) from $40: Don't participate early on in an IPO.

It also taught me about vision and competitive position. Extreme and Foundry sold widgets. Tangible products, yes, but did they really have a future in a world containing companies like Cisco Systems ( CSCO)? Of course not.

Unless you got lucky on the IPO or had good timing ahead of a buyout, you licked wounds.

If, however, you had vision back in 2000 (I did not), you're counting profits with AMZN. This AMZN-EXTR comparison chart tells the story.

AMZN Chart AMZN data by YCharts

AMZN suffered when all hell broke loose in 2000. But, in hindsight, it's evident that it was a different type of suffering.

Even back then, Amazon had a strong and sustainable -- we can now call it "unwavering" -- business model. Companies like Foundry and Extreme were founded to get bought out.

Foundry met that end; Brocade Communications ( BRCD) snagged them for just under $3 billion in 2008. Extreme did not, and now its stock stagnates. It will continue to stagnate unless a buyer comes along. There's just no there there with a company like Extreme. There never was, likely never will be.

In 1999, Jeff Bezos made it perfectly clear that Amazon would be different. Bloomberg Businessweek asked him a familiar question: Any timeline on when you can throttle back on expenses and become profitable? Bezos answered this way:
Our strategy is very, very clear: We're focused on long-term returns for investors. And to throttle back on investment now would be shortsighted. When we have less opportunity, that will probably happen. But as long as we have lots of opportunity, we're going to continue to invest commensurate with that opportunity in a very disciplined and methodical way, but in a long-term context. To do anything else, we believe, is irrational.

I keep that clipping in my back pocket.

I also keep a Haruki Murakami quote with me: "If you can't understand it without an explanation, you won't understand it with an explanation."

That said, I have offered explanation after explanation. And I am beginning to come to a somewhat painful conclusion. While I generally do not believe in Bushian dichotomies, in this case it must just be that two different types of people exist in the world: Those who understand perpetual startups and those who do not.

While I can see why a big number P/E ratio might scare investors, I cannot quite understand why so many refuse to acknowledge Jeff Bezos's history and AMZN's massive stock price appreciation over the last dozen years.

It's almost as if the notion of aggressive reinvestment in the business is a foreign concept. You know, spending money to make money. It's not foreign. As I explained last week, it's a wholly American idea.

I'll run the risk of sounding like a broken record because it's an important message to, at the very least, debate. Don't allow P/E ratios to scare you out of great companies such as Amazon or lure you into portfolio-sapping value traps.

At the time of publication, the author was long FB.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Rocco Pendola is a private investor with nearly 20 years experience in various forms of media, ranging from radio to print. His work has appeared in academic journals as well as dozens of online and offline publications. He uses his broad experience to help inform his coverage of the stock market, primarily in the technology, Internet and new media spaces. He has taken a long-term approach to investing, focusing on dividend-paying stocks, since he opened his first account as a teenager. Pendola, 37, is based in Santa Monica, Calif., where he lives with his wife and child.