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Amazon Is The Most Over-Valued FAANG Stock, Time To Sell?

Updated: Jul 10, 2020

Amazon is valued at 132 times what it earns. But could there still be room to grow?

When Amazon was first listed on the Nasdaq in 1997, its share price was just $18 a share and was known as an "online bookstore". Now, it is trading at $2,674 a share and has its hand in everything from e-commerce to streaming to even grocery shopping. However, with a trailing P/E ratio of over 132, larger than any other major tech company, it makes sense to ask whether or not Amazon deserves to be that overvalued.


The answer? It absolutely does, and most analysts on Wall Street agree.


Amazon should not be treated like most companies where a P/E ratio of over 30 receives harsh criticism, because Amazon is like no other company before. It is uniquely situated as a company that has ties to nearly every industry, and as virus fears continue to grow, Amazon grows too. News of expansion has also caused many analysts to see Amazon in a different light, with the company most recently signing a lease for its largest NYC warehouse to turn into a distribution center. Amazon is also reportedly considering expanding into Live TV with its Amazon Prime, taking on Hulu and other streaming companies that offer this service.


Amazon had a stroke of good fortune recently as well, with streaming service Mixer, owned by Microsoft, closing its operations. This has led most of the streamers to switch to Twitch, Amazon's subsidiary, bringing even more revenue for the already largest gaming streaming service.


Our thoughts? Amazon at this moment is worth keeping in your portfolio as growing fears of the virus cause more customers to become reliant on their services. However, when things return to normal (or as close to normal as they can be), it is seriously worth considering how much more Amazon can actually grow.

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