Amazon.com (AMZN) saw its market-cap increase by over $7-billion today--essentially 100-times their reported quarterly net income. The bulls were eager to try to paint Amazon's "better-then-expected" earnings as summarily magnificent for all of tech, even though Amazon is actually a retailer. Google (GOOG), on the other hand, was deemed to be "company specific" when they disappointed with their slowing rate of net income growth as reported last week. Shares of Amazon.com now trades at a trailing 12-month P/E (price/earnings) ratio of 120x and a forward (expected) 12-month P/E of 62x. A multiple often reserved for companies on the brink of cures for serious medical ailments. Unfortunately, Amazon is a retailer that doesn’t make anything. Six full "self-serving" brokerage firms upgraded shares of the online retailer. Earnings and margins have improved dramatically for Amazon over the last two quarters, but that is primarily due to a huge drop in capital spending. Upon hearing news of the “better than expected” increase in net earnings of $0.19/share, Jim Goldman of CNBC proclaimed that this number bodes very well for technology in general. Again, in case people don’t know, Amazon is a retailer, not a tech stock. And morevover, Amazon’s recent improvement in reported earnings can largely be attributed to its slower pace of technology upgrade costs relative to prior periods. Got that? Amazon is spending less on technological upgrades, which would summarily bode "less well" for technology. Also, let’s dissect the Amazon number to put things in its proper light. The headlines said that earning per shares surged 280% year-over-year. Not a lie. But this $0.19/share quarterly number, pathetic for stock trading just shy of $90/share, is being compared to the 2Q number a year ago of $0.05/share, which just so happened to be the worst quarter since its 1Q number back in 2003. Nevertheless, its proclamation of a “280% increase in net income" is pretty relative. Unfortunately, that will be the easiest year-over-year comparison for Amazon for a while. After increasing by nearly 25-percent today, closing at $86.18/share, Amazon.com now sells at a forward P/E of 62x. Of course, the market is making a bold assumption that the slowdown consumer spending, already visible across an array of consumer related data, will not become even more problematic. Also, Amazon now trades at a higher price than even its highest price seen at the epic heights of the dot-com bubble back in February or March of 2000. To sum it up, Amazon is among the most ridiculously priced stock on the U.S. stock market, again. However, for those that missed the opportunity to impale oneself on shares of Amazon in the year 2000, you've been given a second chance.
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