Question

do you think amazon stock is under or overvalued? what benchmark would you compare it to?

do you think amazon stock is under or overvalued? what benchmark would you compare it to?

Homework Answers

Answer #1

I think Amazon stock is highly OVERVALUED.

I think Amazon is highly overvalued because it is trading at a price to earning ratio of almost 125 which is not sustainable in the long run. Price to earning ratio of 30-40 is sustainable for the technological companies which are mostly operating into various segments but price to earning ratio of 125, is insane for companies like Amazon to hold onto in the longer period of time and hence I am determining it through price to earning ratio and I am considering it a highly overvalued stock in the long run and hence it is bound to get corrected.

I feel that Amazon is highly overvalued and I am comparing it to industry price to earning ratio of 40.

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