Amazon.com, Inc. (AMZN): This Stock Still Wildly Overvalued

Razor-thin margins are why Amazon is bouncing near breakeven on the bottom line and why its stock trades at absurd multiples. If Amazon can’t prove that it can make a profit eventually, investors will give up on this highly valued stock. After all, how much would you pay for a company that doesn’t make any money?

Lowered expectations
Despite the strong performance of Amazon stock, the expectations on Wall Street keep getting lower. 2013 earnings forecasts have fallen from $1.74 to $1.48 over the past three months. For 2014 the same number is down from $3.93 to $3.57. Eventually, falling estimates will come back and bite a company, and eventually, investors are going to need to see profit on Amazon’s horizon.

When you compare Amazon.com, Inc. (NASDAQ:AMZN) stock to a company like Apple, it’s hard to see the value. Apple has a 8.6 forward P/E ratio and pays investors a 2.5% yield, compared to a 76 forward P/E and no dividend for Amazon. That doesn’t sound like a good deal to me.

Fool contributor Travis Hoium manages an account that owns shares of Apple and is personally short shares of Amazon.com. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple.

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