Amazon trading at high valuations
Amazon (AMZN) stock is currently trading at a lofty valuation of 241x on a trailing-12-month earnings basis. The company’s PE ratio has been in triple digits for years. The company has been aggressively investing in various businesses for years, which deflates the bottom line in the short term.
In terms of other valuation metrics, Amazon seems to be trading at high valuations. Amazon’s price-to-book ratio is ~19.6x. Its rival eBay (EBAY) is trading at 3.2x, Alphabet (GOOGL) is trading at 4.3x, and Facebook (FB) trading at 7.3x. In terms of the EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] ratio, the four companies are trading at 24.8x, 11.6x, 12.6x, and 18.7x, respectively.
Behind Amazon’s valuations
Amazon stock trades at a premium as the company has a stranglehold in many segments. It is a leader in the e-commerce business as well as the cloud segment. The company competes with Netflix (NFLX) in the content streaming segment and offers quality content.
Amazon stock has done relatively well this year. Tech stocks (XLK) have risen 21% year-to-date (or YTD), while the broader S&P 500 Index (SPY) has gained 6.3% in 2017. Meanwhile, Amazon stock has gained 27% YTD, breaching the $1,000 mark in the process before slumping a bit.
Of the 46 analysts who follow Amazon stock, 40 analysts gave it a “buy” rating, four gave it a “hold” rating, and two gave it a “sell” rating.