One-On-One With the Amazon.com Bull

CIBC Oppenheimer analyst Henry Blodget made one of the most controversial calls in recent Wall Street history. Now what's he got to say?
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SAN FRANCISCO -- This is a good week to be Henry Blodget. The outrageous 400 price target the

CIBC Oppenheimer

analyst set on

Amazon.com

(AMZN) - Get Report

was hit in just three weeks. Back

then, he said that he was just putting his money where his mouth was. But now that the stock has surpassed that target by a whopping $80 a share pre-split, Wall Street is all ears to the musings of Blodget -- and so are we.

TSC:

What a fine mess! Three weeks ago, what did you think a 400 price target would do?

Blodget:

I wanted to say there is long-term upside. Do not sell if you haven't got the story. Take a look at it. I hoped to talk about the company for six months, but the stock went all over the place.

TSC:

But three weeks? It was a 12-month target!

Blodget:

Yes, 12 months. I wasn't sure

how long it would take to get there, but I felt comfortable with it. I thought it might go to 100 then 400. I was just saying that it is okay to buy at 100 and it's okay to buy at 350.

TSC:

But do you think it'd be at 180 bucks a share

after

a split?

Blodget:

I don't know. I think so. If people had focused on that particular target, then it would've stopped when it hit 400, but it's still going.

The 400 target may have put a stamp of credibility on the stock. But at the time there was still a lot of upside.

TSC:

So what happens now? With the stock trading higher than the target, do you raise it again?

Blodget:

I'm just going to let

the target ride. We are telling people: If you were smart/lucky enough to be in it, you have to decide how much exposure you want. All

of these Internet stocks have spiked and come down three times now. They all look like they are going to the moon and then come back down. I say don't sell all of it, and don't try and time the top. But figure out how much exposure you want, 1% or 3% or whatever. Just decide as a percentage, then buy or sell to get it there.

TSC:

And about your buy rating: don't you think Amazon.com is overvalued right here?

Blodget:

It's a long-term buy. I'm not going to whip it around. There's a good chance that maybe the stock will come back next month and then the 400 target will look okay again. By any normal valuation model, these are the most expensive stocks in history. And what history has told you about these stocks is that valuation is a lousy tool for valuing stocks. Stocks don't go down because they are overvalued. Arguably

Yahoo

(YHOO)

was overvalued when it went public, but there was so much potential.

TSC:

If you could go back and do it again, how would you do it differently?

Blodget:

I would do the same thing. I would say there is a lot of upside, open-ended upside. Given what happened, I probably would not have put a target, but it worked out fine. If that price target is responsible for this, then in this industry it's probably much better to look at stocks with a fuzzy view.

TSC:

Yes, but given the volatility of Net stocks, isn't a bullish call like that a self-fulfilling prophesy? What do you say to the charges that you're irresponsible?

Blodget:

Personally, I had no idea that it would be perceived this way. It's a volatile stock, and that -- a 70% premium -- isn't a very aggressive call. That said, we are entering a new phase of stock movement that has a lot to do with Internet day trading. No one understands what the long-term implications are. Maybe in two or three years, no one will care about what research firms are saying.

TSC:

Maybe so, but now it seems that Internet investors are looking for any reason to buy into these stocks, and three weeks ago, your call was that reason.

Blodget:

True.