For Amazon Investors, Focus On The Bigger Picture

There are two ways to approach Amazon.com, Inc. (NASDAQ:AMZN)'s stock after the company's second-quarter earnings report. On the one hand, a notable drop in quarterly profits and an outlook for heightened spending ahead foreshadows what could be expected in the near term.

But on the other hand, investors placing emphasis on quarterly performance are missing out on the much bigger picture, AB Mendez of Frost Investment Advisors explained as a guest during CNBC's "Squawk Box" segment. As an Amazon shareholder for seven years, the portfolio manager has learned over time to "focus less on the quarter-to-quarter ups and downs."

Instead, it is more important to focus on Amazon's "strategic visions," he continued. But at the same time, this doesn't imply that quarterly reports should be completely ignored; the company did show a "healthy" top-line growth, which also bodes well for the long-term trajectory.

$1,000 Stock A Psychological Barrier

Amazon's stock breaking above the $1,000 per share mark has "psychological significance" that can either attract or scare away investors. But from a valuation perspective, there isn't any reason to be concerned with the stock price, Mendez continued.

From a price to cash flow multiple, the stock is trading "right around the five-year medium multiple." On a price to free cash flow the stock is now "less expensive" on a similar five-year average time-frame.

"This quarter notwithstanding but on a rolling 12-month basis they are converting more of their earnings into free cash flow," he explained. "Cash and profitability [are] improving."

At time of publication, shares of Amazon were down 3.55 percent at $1,008.90.

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