I was advised to buy amazon but is 60 too high for the PE ratio?
Answers
541 points
NYInvestor answered 11 months ago …
I wouldn't buy it. On a fundamental level, the P/E doesn't look "cheap". But also, look at the stock's price movements. I think your maximum upside here (unless they come out with some major announcement) is about 10 points, and your downside could be around 20 points. That's not a risk reward relationship I'd be comfortable with.
What does everybody else think?
825 points
Dragonsbane answered 11 months ago …
I'll start by telling you I don't know much about the company. But from a global macro perspective, the economy is heading downhill in North America, South America, Europe and Japan. Chances are China will follow (though they won't go negative). You really should be asking yourself, is now the time to be investing in an online retailer?
Another huge negative for Amazon is the fact that E-Bay recently cut their listing fees by 70%(approximately) in order to better compete with Amazon. Price wars tend to be bad for margins and profits.
In short, I wouldn't touch this with a ten foot pole.
3680 points
MNSL answered 11 months ago …
If you see that the Amazon is going to make excellent return for the next 20 years then you must think about buying it. However, this is not the time to buy this stock. Their will be less demand for online retailers in the next 02 years, due to slower world growth.
I have a doubt whether they can maintain return on equity more than 20% in the future. I think we must look for future earning changes now. However, there will be some upside potential for this stock in the short term.
There are companies in other sectors they did not have good return on equity, good balance sheet for the last 20 years. However, they are going to make rapid progress in demand, return on equity, cash flow. Earnings in the next 10 years.
Factors to watch
Competition
World growth
Future earnings changes
Demand for online retailers in the future
1902 points
alanj answered 11 months ago …
I wouldn't touch this stock. It looks to be overbought right now. Plus, if you pull up a price chart for either the DOW or the S&P 500 you will notice that AMAZON has pretty much followed right along with the same trend as those indexes. The Indexes are getting close to being overbought. They have been unable to break through the recent high of several weeks ago (the new support level). The volume has also been down. Most likely the indexes are very close to start trending down. When they do, AMAZON will do the same if it continues to follow the same pattern.
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