Have Shares of Alphabet and Amazon Peaked?

It has been about two months since Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL) reached over $1,000 per share, and the stocks have been stuck in a range ever since. Although the share prices have declined there is no reason to expect a big correction on the way, as Amazon still trades at 240 times its earnings per share and there are no signs that it is going to go drop below that multiple anytime soon.

It’s likely that the stocks won’t break above $1,000 unless they have strong earnings results next month. However, a poor result could send both stocks under $900 if investors start having second thoughts about the valuations.

The next earnings result will be the first that includes Amazon’s recent acquisition of Whole Foods and that could have a big impact on whether the company’s stock rises or not. Given the company’s focus on cutting prices it’s likely we’ll see strong sales growth at the cost of profitability, but this hasn’t been a problem for Amazon investors yet.

Value investors aren’t likely going to find much of a reason to invest in either of these highly priced stocks, and it’s ultimately growth investors that see much more top line growth available that will be attracted. Investors should be careful buying these stocks because even with strong growth, these prices can’t keep climbing forever. Year-to-date Alphabet has seen its stock rise over 21% while Amazon has produced returns of 26%.

If you’re a big believer that these stocks will continue growing you may want to wait out another dip ahead of earnings to try and maximize your returns. I believe these stocks will eventually break $1,000 again, but earnings will dictate if they can stay above that level or not.