by winston » Wed Aug 22, 2018 1:31 pm
not vested
Overvalued Tech Stocks to Sell: Amazon.com, Inc. (AMZN)
Forget $1 Trillion, AMZN Will Hit $2 Trillion by This Date
Amazon (NASDAQ:AMZN) is one of the better-known overvalued tech stocks (or better known stocks, period). Thus far, however, I have personally been incorrect on AMZN as its march higher continues.
To be sure, Amazon has made and profited from visionary decisions. The vision began with the decision to sell books online in the mid-1990s. It has continued with initiatives such as Amazon Web Services (AWS) as cloud computing began to take off. Today, AWS drives the majority of its profits.
The forward P/E stands at about 110. Since analysts estimate a profit growth rate of 279.6% this year, investors may overlook the triple-digit P/E for now. However, over the next five years, the same analysts estimate average annual profit growth at 45.9%.
Such a P/E appears difficult to justify at the slowing growth rate. Investors should also bear in mind that an economic slowdown could quickly bring down that estimate.
Moreover, valuations have taken AMZN’s market cap close to $920 billion, making it the world’s second-largest company. The world’s largest company, Apple (NASDAQ:AAPL), is expected to earn about seven times as much in net income this year.
I expect Amazon to remain a strong competitor in both retail and the cloud for decades to come. However, investors can earn high returns in other stocks with much less risk. Given this valuation, I would recommend staying away.
Source: Investor Place
It's all about "how much you made when you were right" & "how little you lost when you were wrong"