6 ms·

>Sometimes I wonder if I’m just going to be holding my AMZN stock until I retire. An HN comments section is hardly the place to go into this, but I just can't

>Sometimes I wonder if I’m just going to be holding my AMZN stock until I retire. An HN comments section is hardly the place to go into this, but I just can't let a comment like that pass unchecked, so forgive me! But a company's potential growth and the apparent rosiness of their future has nothing to do with whether you should be holding their stock. Those factors are taken into account with the current stock price. You are only justified in having such an attitude towards any individual stock if you are either a financial genius or have some insider information.

deleted 9y ago
[deleted]
adventured 9y ago
That 230 PE ratio, matched against mediocre earnings growth vs the outsized valuation, is more than enough to raise serious concerns about the viability of maintaining such an extreme valuation.
- mrkstu 9y ago
  PE has little to nothing to do with Amazon's stock price. They have, as they have shown, complete ability to dictate the size of their earnings based on how much they want to spend on new research and infrastructure. Amazon could milk its existing assets for a huge return and provide sky high earnings- instead it is doing what it has done to this point, build dominating positions in multiple new markets. Bezos has been brilliant in leveraging his cash generating businesses into growing revenue. There is 0 reason to stop at this juncture to artificially prop up the PE ratio.
  - spott 9y ago
    > They have, as they have shown, complete ability to dictate the size of their earnings based on how much they want to spend on new research and infrastructure. I think you are thinking of profit, not earnings. Earnings is revenue - cost of production, which has nothing to do with R&D or infrastructure development.
    - mrkstu 9y ago
      R&D and infrastructure are still expenses and lower your earnings- it is still cash going out that you can't return to shareholders.
    - sib 9y ago
      Earnings == profit. You may be thinking of gross margin. "Earnings are the amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year."
      - spott 9y ago
        >https://money.stackexchange.com/questions/22795/is-there-a-difference-between-a-companys-profit-vs-earnings https://money.stackexchange.com/questions/22795/is-there-a-d... This has a different answer than Investopedia. The difference is subtle, but it is there.
- spott 9y ago
  Meh. Their P/E ratio is roughly 100x the average of the S&P500, which means a growth of 100x in earnings would bring them in line. That is roughly 12 years of their current growth rate, which isn't actually that crazy.
  - pellucide 9y ago
    AMZN PE=350. S&P average PE=20. AMZN PE multiple=17. So AMZN is priced to grow at the current rate for 17 years, which is a bit on the crazy side.
- matte_black 9y ago
  I’ve been hearing this for years. “Beware of PE ratio!” Yet I bought stock anyway (in all the FAANNG stocks) and have gotten huge portfolio growth. I’m probably just a lucky idiot. Still lost money on my Litecoin gamble.
- mythz 9y ago
  AMZN P/E ratio is 350: https://www.google.com/search?q=NASDAQ:+AMZN https://www.google.com/search?q=NASDAQ:+AMZN That's set to go up even further tomorrow. Their valuation is so far out of the stratosphere it's no longer tied to any financials. They have a great business with nice artificial barriers to entry to protect them but I can't see how they can grow into their current evaluation. I consider it a speculative stock at this point.
  - ggg9990 9y ago
    What they have demonstrated, completely uniquely, is their ability to repeatedly enter brand-new markets and completely dominate them. That’s why the market estimates their growth potential somewhere between impressive and infinite.
exolymph 9y ago
This gets complicated and meta because one of the things priced into the stock is the idea that it'll continue to grow in value.

deleted 9y ago

[deleted]

adventured 9y ago

That 230 PE ratio, matched against mediocre earnings growth vs the outsized valuation, is more than enough to raise serious concerns about the viability of maintaining such an extreme valuation.

mrkstu 9y ago
PE has little to nothing to do with Amazon's stock price. They have, as they have shown, complete ability to dictate the size of their earnings based on how much they want to spend on new research and infrastructure. Amazon could milk its existing assets for a huge return and provide sky high earnings- instead it is doing what it has done to this point, build dominating positions in multiple new markets. Bezos has been brilliant in leveraging his cash generating businesses into growing revenue. There is 0 reason to stop at this juncture to artificially prop up the PE ratio.
- spott 9y ago
  > They have, as they have shown, complete ability to dictate the size of their earnings based on how much they want to spend on new research and infrastructure. I think you are thinking of profit, not earnings. Earnings is revenue - cost of production, which has nothing to do with R&D or infrastructure development.
  - mrkstu 9y ago
    R&D and infrastructure are still expenses and lower your earnings- it is still cash going out that you can't return to shareholders.
  - sib 9y ago
    Earnings == profit. You may be thinking of gross margin. "Earnings are the amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year."
    - spott 9y ago
      >https://money.stackexchange.com/questions/22795/is-there-a-difference-between-a-companys-profit-vs-earnings https://money.stackexchange.com/questions/22795/is-there-a-d... This has a different answer than Investopedia. The difference is subtle, but it is there.
spott 9y ago
Meh. Their P/E ratio is roughly 100x the average of the S&P500, which means a growth of 100x in earnings would bring them in line. That is roughly 12 years of their current growth rate, which isn't actually that crazy.
- pellucide 9y ago
  AMZN PE=350. S&P average PE=20. AMZN PE multiple=17. So AMZN is priced to grow at the current rate for 17 years, which is a bit on the crazy side.
matte_black 9y ago
I’ve been hearing this for years. “Beware of PE ratio!” Yet I bought stock anyway (in all the FAANNG stocks) and have gotten huge portfolio growth. I’m probably just a lucky idiot. Still lost money on my Litecoin gamble.
mythz 9y ago
AMZN P/E ratio is 350: https://www.google.com/search?q=NASDAQ:+AMZN https://www.google.com/search?q=NASDAQ:+AMZN That's set to go up even further tomorrow. Their valuation is so far out of the stratosphere it's no longer tied to any financials. They have a great business with nice artificial barriers to entry to protect them but I can't see how they can grow into their current evaluation. I consider it a speculative stock at this point.
- ggg9990 9y ago
  What they have demonstrated, completely uniquely, is their ability to repeatedly enter brand-new markets and completely dominate them. That’s why the market estimates their growth potential somewhere between impressive and infinite.

exolymph 9y ago

This gets complicated and meta because one of the things priced into the stock is the idea that it'll continue to grow in value.