With Amazon.com, Inc. (NASDAQ:AMZN) stock approaching all-time highs, many investors are considering how the company’s long-term prospects correlate to the current valuation multiples being ascribed to Amazon by the market. By all accounts, Amazon is expensive; the stock currently trades at over 83x forward earnings, and remains one of the most expensive (yet highly sought after) growth stocks in the technology sector.
The reasons for Amazon’s long-term appeal to investors looking for exposure to one of the preeminent giants in the booming technology sector are abundant. Investors waving the Amazon flag have long been bullish on the company’s growth profile in a number of diversified growth segments, its large capital expenditures promoting growth in segments that are becoming increasingly profitable, the strength of the company’s management team in following the prescribed long-term growth strategy, as well as its position as market leader in a number of the key markets Amazon operates in.
The bull case is strong, and investors who have put their faith in a company that for many years has produced less-than-stellar profits for investors have been rewarded. The company is beginning to turn reasonably consistent profits, and looks to be focusing more on profitability than growth of late, moderating the pace of its investment spending (which remains robust).
A long-term investor such as myself who still believes Amazon to be overvalued still has a hard time making a bearish case against Amazon, a company with decades of forward momentum, with bullish market sentiment continuing to drive this company forward.
