Amazon (NASDAQ:AMZN) is another stock that's at all-time highs, recently breaking through the $3,000 mark. The tech giant is another stay-at-home stock that's been a popular buy among investors during the coronavirus pandemic.
The rally that Amazon's been on is incredible, given that on April 30, when it released its first-quarter results, the company failed to beat analyst earnings expectations. But revenue was still strong, with the quarterly top line up 26.4% year over year, reaching $75.5 billion. The company expects revenue for the second quarter to fall between $75 billion and $81 billion, representing year-over-year growth anywhere between 18% and 28%.
The stock initially tumbled after the Q1 results and would fall below $2,300 on May 1. But it's been red-hot since then, and its year-to-date returns are now north of 70%.
The challenge for Amazon is that there's a risk from the demand side that a recession could lead to less spending in upcoming quarters. As businesses are operating at reduced capacity, there's a potential for supply issues to also affect the online retailer's results. A disappointing second quarter could send the overpriced stock into a tailspin.
Shares of Amazon are currently trading at more than 130 times earnings and 22 times book value. Its price-to-sales ratio of about 5 compares favorably against Teladoc, but all the multiples combined paint a picture of an extremely overpriced stock, one that could be vulnerable to a correction.
When the markets crashed in March, shares of Amazon were trading for close to $1,600 -- almost half the price they've reached today.
Actionable Items
Amazon at price over $3000
22 times book value
130 times earnings
$1600 half of price - Market crash - March 2020
Q1 result - May 1, 2300 , year-to-date up 70%
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