Amazon.com, Inc. (NASDAQ:AMZN) had a strong 2017 where its stock price rose 56% and broke through not only $1,000 per share, but would eventually go on to reach a high of over $1,200. However, the stock’s high valuation might have investors concerned that the price may be too high.
The share price currently trades at nearly 300 times its earnings and 23 times its book value. While those multiples might scare off value investors, the stock could still have a lot of upside in 2018.
The bull market shows no signs of slowing down and with the U.S. government recently reducing corporate tax rates, that will result in more after-tax profits and more cash flow that is kept by companies like Amazon. This will help provide the company with more resources to take on acquisitions and to further grow its business.
The acquisition of Whole Foods is still fairly recent and Amazon will have plenty of opportunities to grow its business in that segment as it looks to find more ways to make its products and services more easily accessible for customers.
While Alphabet Inc (NASDAQ:GOOG) might trade at just 35 times its earnings and might seem like a better value, Amazon is more diversified in its products and services. The big question is whether Amazon still has enough potential to justify the substantial premium that investors will be paying for the stock.
A lot of Amazon’s success in 2018 will likely be determined by how well the company will be able to integrate Whole Foods into its business and capitalize on those new opportunities.
