Now one of the world’s largest technology companies, e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) just reported earnings which have simply blown analysts and investors away. Besides the top- and bottom-line numbers, which took nearly everyone by surprise, of note in the company’s recent earnings release was how well the company’s business model has matured from a profitability standpoint, providing support to long-term bulls who believe the stock is accurately priced at current levels.
Amazon remains one of the darling stocks of our time, currently trading at a trailing price to earnings multiple of 256, a price to book ratio of above 27, and a price to sales ratio of more than 4, each indicating a massive premium compared to any of the company’s peers at this point in time. While Amazon has shown that its growth rate is not likely to slow down, choosing to reinvest massive gross profits back into the company at higher rates of return, these multiples are truly astounding and investors must ask themselves how long it will take for Amazon’s earnings catch up to its premium?
Pushing that discussion (that no one wants to have) aside, Amazon’s retail subscriptions and third party sales increased substantially year over year, to the tune of 60% and 44%, respectively. These two operating areas are largely considered to be the profitability drivers for Amazon moving forward, and with subscription revenue expected to continue to increase following the announced increase in Prime membership fees, shares of the e-commerce giant have increased approximately 4% in the trading day following the announcement, signaling just how much investor interest remains for this iconic company.
Invest wisely, my friends.
