Amazon's Price Tag Gives Pause

The stock has started to underperform the broader tech index.
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Wall Street can't get enough of

Amazon.com

(AMZN) - Get Report

, but investors might want to take a break on the sidelines.

On Thursday, RBC Capital Market became the latest firm to put a staggering price target increase on the stock while maintaining a neutral rating.

RBC analyst Jordan Rohan upped his price target by 67%, to $75 from $45. Shares of Amazon were recently up $1.12, or 1.7% to $69.26.

Rohan joins

the line of sell-side analysts to suddenly see more potential in Amazon after a sharp rally in the stock following a strong first quarter.

Wall Street has scrambled to raise price targets fast enough to keep up with the soaring stock. Shares of the online retailer have rallied about 20% since the last week of April, and major investment banks such as Citigroup and Goldman Sachs have increased sharp price targets during this time.

Investors, however, should be wary of the sudden, newfound bullishness, because momentum-chasing -- rather than a dramatic change in Amazon's fundamentals -- may be driving the stock.

But that momentum could turn quickly given the stock's lofty 53 times forward earnings -- and the staggering 2.73 price-to-earnings-to-growth ratio it commands.

Indeed, RBC may be reaching when calculating the aggressive price target for the stock. "We are releasing our initial 2009 estimates and rolling our price target to incorporate 2008 and 2009 estimates versus the prior practice of using 2008 only," said Rohan.

Of course, given how much analysts struggled to understand the company's earnings in 2007, betting on the outlook for 2009 seems to be a risky venture.

Investors who climbed on board during the last round of bullish price target upgrades may not have been well-served, either. At the end of May, Citigroup jacked up its price target for the stock to $67 -- a 30% increase from the $51 it had previously seen as the stock's true value. That followed a 55% price hike from a $33 target only a month earlier. Jackson Securities initiated coverage of the stock that week with a $75 price target.

Despite the flash flood of bullishness, investors would have been better off avoiding the stock this past month. Shares of Amazon have underperformed the

Nasdaq

by about 3% since May 23 -- excluding Thursday's gains.

And investors who bought into the brief rally in early June as evidence of the thesis playing out would be even more disappointed. Shares have been off about 6% since highs on June 5.

The sudden shift in consensus from bearish to bullish can be tempting for investors -- until they realize it could turn the other way just as quickly.