Market Overview

Pro: Even At 205 Times Earnings, Amazon's Stock Is Still Attractive

Pro: Even At 205 Times Earnings, Amazon's Stock Is Still Attractive

The most expensive stock in the S&P 500 index based on a forward P/E ratio is Incyte Corporation (NASDAQ: INCY) at 206 times forward P/E. Ranking in a very close second place is, Inc. (NASDAQ: AMZN) at 205x forward P/E.

While one could easily conclude that Amazon's stock is expensive, the case can be made for the stock to be attractive, at least according to S&P Global portfolio manager Erin Gibbs.

Amazon's valuation has been climbing steadily from 140 times expected earnings over the next 12 months to its current 205 times, Gibbs explained during a recent CNBC "Trading Nation" segment. This is justified given expectations for an impressive triple-digit percentage earnings growth in each of the coming two years.

Helping to boost the case for a high multiple in Amazon's stock is the company's recent acquisitions, she continued. Most notable is the acquisition of the organic grocery chain Whole Foods, which will add another layer to Amazon's diversification story and generate "impressive profit growth" moving forward.

Boris Schlossberg of BK Asset Management was also a guest on the "Trading Nation" segment and pointed out the obvious: Amazon is among a very small handful of companies in existence today that boasts a "world dominance script."

Simply put, investors are ascribing a multiple that reflects the potential for "world dominance," he explained. While there is always the possibility that Amazon could disappoint investors over time, the fact is that the very minimum investors shouldn't be shorting Amazon.

Related Links:

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Hey Jeff Bezos, Here's Why Amazon Should Bring HQ2 To Detroit

Latest Ratings for AMZN

Nov 2020China RenaissanceUpgradesHoldBuy
Nov 2020CitigroupMaintainsBuy
Oct 2020BenchmarkMaintainsBuy

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