Amazon.com amzn is by far the market’s most overvalued stock, according to a survey of eight leading Wall Street strategists.
All but one of the eight analysts polled cited Amazon.com as one of the market’s three most overvalued stocks. Runnersup were online auction house eBay ebay and Priceline.com pcnl, which pioneered name-your-own-price sites on the Internet. Not surprisingly, all of the stocks cited as overvalued were Internet related.
Chief executive Jeff Bezos’ online retailer, which has lost money since its inception, remains one of Wall Street’s darlings with a market cap of some $28 billion. Amazon.com is currently the market’s fifth-highest valued retailer, surpassed only by brick-and-mortar heavyweights Wal-Mart wmt, Home Depot hd, the Gapgpx and– just barely–Dayton Hudson dh.
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Amazon’s volatile stock price, $168.25 at yesterday’s close, is currently about 11 times higher than it was a year ago. The share fell sharply ahead of and shortly after the company posted its quarterly result following the market’s close on Wednesday.
Market strategists, who follow the whole market but keep a close eye on individual stocks as well, said they were worried about Amazon’s widening losses and the outlook for further losses in the future. Although Amazon’s sales continued to explode in the first quarter, the bottom line came under pressure from thin profit margins and spending on marketing and new acquisitions.
At the presentation of the company’s quarterly earnings, Amazon.com Chief Financial Officer Joy Covey warned that losses will deepen significantly in coming quarters beyond what analysts had been expecting.
“With our recent acquisitions and the many investments we are making, it is certain our operating losses will increase substantially in the near quarters–relative to sales, in absolute dollars and relative to published estimates,’ Covey said in a conference call with analysts, broadcast over the Internet.
Several strategists expressed frustration with what they called the irrational pricing of Internet stocks, especially Amazon.com, but said they were certain their view would be vindicated in the long term.