Spotlight: Amazon.com Inc.

In recent light of more and more internet companies getting listed on the stock market, you might wonder whether a lot of these internet companies aren't overpriced. Also, what happened to companies that have been listed for a longer period? More importantly, what does the future hold for these stocks. Reason for Stock Smash to shed some light on one of these stocks: Amazon Inc. (NASDAQ:AMZN). Amazon faces some serious challenges. To begin with their profit margin: Amazon has deliberately chosen a business strategy that gave them a low profit margin, but a higher growth rate of their customer base. This is also the reason why Amazon has one of the lowest profits in their segment. Moreover, some of Amazon's strategies did not quite work out the way the hoped: such as Amazon Kindle and the Fire Phone. Even though their earnings are low, their stock price is still really high, resulting in a Price/Earnings-ratio of 850! If we compare this to the rest of the segment, we note the second and third highest P/E-ratios are 22.49 and 21.93 respectively. These numbers are miles away from the P/E-ratio of Amazon. Normally, a high P/E-ratio relatively to the market could indicate high growth expectation. However, The P/E-ratio is so enormously high that it is very likely that the stock is overpriced. Besides the lack of profit, Amazon also faces increasing competition, further pressing its margins. Other companies have shown to gain profit even when they focus on growth of their customer base (such as Alibaba (NYSE:BABA), which recently got listed). The challenge for Amazon is to finally gain some profit, while still increasing revenues under tenser competition. It seems unlikely that Amazon will be able to produce cash flows that would reflect the current price of the stock. Therefore, we name Amazon a Stock Bash.