Is Amazon’s Stock Too Expensive?

June 20, 2017

Amazon recently reached $1,000-per-share – even before Amazon announced its intention to buy Whole Foods, the company was a standout beneficiary of a struggling retail sector. While Target, Macy’s and Kohl’s were down over 20 percent this year, Amazon was growing its retail dominance.

In an interview with U.S. News & World Report, Liz Miller explained that many may continue to think of Amazon as a technology stock but it is more appropriately the leading retail stock in the S&P 500. What is abundantly clear this year is that traditional retail is nearly crumbling but consumers have not reduced their discretionary spending. They are increasingly transitioning to shopping exclusively on the internet. Amazon is a prime beneficiary of this growth because the company almost single-handedly created this trend. Perhaps it is not surprising that the stock appreciated as much (and more) as traditional retailers declined.

It is also never easy to value Amazon as a stock; traditional valuation metrics look very expensive. Yet the valuation has perpetually reflected the future upside potential of internet purchasers. And by any growth measure, the online retailer has exceeded expectations.

Is the stock too expensive? Any stock that temporarily outperforms the broad averages can easily have a correction. If a correction were to occur, though, it would likely indicate a buying opportunity for the leading retailer of our time and the primary beneficiary of every positive consumer economic indicator.

Read Liz Miller’s interview in U.S. News & World Report.