Amazon.com, Inc. (NASDAQ:AMZN) is back at all-time highs trading at more than $2,100 on Monday. The stock is up already 12% this year as a strong earnings performance that saw sales rise 21% year over year in the fourth quarter has sent it soaring.
The trillion-dollar stock is now valued at more than 90 times its earnings. Even its forward price-to-earnings multiple of 52 is still a staggering valuation. Despite the growth analysts are expecting, Amazon trades at a price-to-earnings-growth multiple of 2.4.
Given how expensive the stock has become and with political uncertainty potentially impacting tech stocks in the upcoming election, Amazon could be a risky stock to hold. Previously, the stock broke through the $2,000 mark threshold only to end up falling back down in price soon after. And while its recent results were good and impressed analysts, there may not be enough of a reason to justify buying shares of Amazon at its current valuation.
The stock is currently well into overbought territory with a Relative Strength Index (RSI) of more than 79 – the highest that it's been all year. When stocks go above an RSI of 70 they're considered to be overbought and due for a drop in price. Amazon is well past that mark and it could be overdue for a dip. The markets as a whole are very bullish and the danger is that stocks like Amazon could be the greatest at risk if investors start to turn bearish not even on Amazon but just the markets in general.
