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I can think of some reasons why they might be priced with the expectation of massive growth: - The nascent cloud computing business - The potential to be the

I can think of some reasons why they might be priced with the expectation of massive growth: - The nascent cloud computing business - The potential to be the iTunes of books (the kindle store independent of the hardware) - No serious competitors in terms of becoming the wal-mart of online retail and a huge reservoir of expertise in this area. The real question is whether this is all now rationally factored into the price.

cjlars 16y ago
In my eye, ebooks are the big driver here. The core market for the Kindle is older, wealthier individuals (read: investors) and sales revenue from ebooks rose 173% last year, Amazon sells more Kindle books than physical books and so on. It's all pretty impressive to the casual investor, who can feel like he's making a good bet on the 'future of reading'. Even Barnes & Noble, who is shackled by it's physical stores and has falling profits is trading at a generous 23.5 P/E today. I'm passing on AMZN for sure.
- zhyder 16y ago
  "has falling profits (and) is trading at a generous 23.5 P/E today" 23.5 is not generous at all if the denominator is tiny (coz of the falling profits). P/E is actually pretty meaningless when E is small coz of low margins [1], since small transient changes in margins (e.g. .1% to 5%) can make P/E vary wildly. And it's even more meaningless when E is negative. [1] The exception being when the low margins are steady, and hence predictable.