Amazon: 250 times Earnings

Amazon’s PE ratio today is in excess of 250.  The stock, trading at close to a thousand dollars per share when its earnings per share are under $4. Maybe they should have spelled it A-M-A-Z-ING. I could understand this price if Amazon was on the cusp of releasing some world changing technology ---- something that could drive its earnings much higher --- but it’s a company that is a quarter century old and derives over 90% of its revenues from the sale of pretty normal goods. Nothing exciting there. Would you pay $2,500,000 for a hot dog stand that is netting $10,000 per year?  That’s what people are doing here.

I think part of the problem is that so much stock trading is now automatic.  Bot-traders spotting a trend (up) and just buying into it. I expect another problem is institutional traders who were pre-pubescent when Netscape was trading at 100 times earnings and then disappeared along with many other dot-coms.  

Shareholders may be giddy from the rarified atmosphere into which this and many other stocks have risen. Euphoria.  But laugh now and cry later. This is unsustainable. Sooner or later the bots will spot the inevitable downtrend and drive the stock into the dirt, and the panicked gen-X traders will discover that the keyboard has a Sell button.