Just found a great article on Forbes that looks at whether Amazon, with a market cap of $465 Billion, represents good value from a value investing perspective.
Here’s an excerpt from that article:
A company’s financial statements don’t matter to most when a stock is on the rise any more than they would if we tried to value tulips.
And Amazon is no tulip. It’s one of the most innovative companies in existence. It’s unquestionably an extremely valuable enterprise with a bright future. It’s just not worth $465 billion. And therein lies the challenge.
Most people can’t do that. It’s not in our nature. We take comfort in crowds.
Amazon is a great company selling at a bad price. That’s not to say you can’t make money on the stock if you time your trades correctly. Investors have made money on everything from tulips to Bitcoin. Why not Amazon?
Value investors, however, must ignore Wall Street. We need to recognize that the value of an investment is driven by a company’s earnings and what it does with those earnings. If we must rely on the future sale of an investment to make the investment worthwhile, we are no longer investing. We are speculating.
You can read the full article on Forbes here.
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