In January Amazon’s market value was approaching $200 billion as one of the biggest franchises on the planet. Its miniscule current earnings were a side-show as expectations soared on its massive capital expansion. Fast forward to today and a third of that value has evaporated. Some earnings disappointment and an ongoing sell-off in Nasdaq favourites can hurt any stock but to lose a third of a franchise value highlights a volatility which is unnerving and indicates how much of the “value” is predicated on events in the future.
Even today after a 30% free fall over 3 months the company is trading on a valuation multiple of more than 85x its forecast earnings. So for those commentators out there saying that speculative spirits have capitulated one would suggest that 85x earnings is hardly compelling evidence.
Here’s the painful share price chart from Bloomberg:
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