[smakz]

"The bottom line is this: Amazon trades at more than three times Apple's current valuation, eight times RIM's valuation and just about two and a half times Google's valuation. This is simply way too high."

The article is almost laughable in it's simplicity - if you take CNN/Fortune articles seriously please don't invest your money. This article is overly focusing on one antiquated notation that P/E is the only thing that matters, an idea that isn't taken seriously by anyone close to Wall Street or finance any more (if it ever was, seems like this idea is only perpetuated by "pop" finance drivel such as Fortune).

There are several more interesting metrics to look at when evaluating a stock, including cash flow, profit margin, return on equity, growth rates, and many more.

Amazon has been consistently growing in double digits throughout the recession. They have a profit margin of 3% (compared to Apple's lofty 20%). They have a market cap of 80 billion with annual sales of 24 billion versus Apple's market cap of 280 billion with annual sales of 65 billion.

Where is Amazon's growth ceiling in their respective markets? Where is Apple's? What is next for Apple after the iPad (which missed sales targets)?

If you are going to invest in a stock, you need to ask these tough questions and think for yourself. You can't just look at a P/E ratio and know whether a company is over or under valued. Amazon rode the recession with a 40+ P/E ratio, and now the market is picking up again. Decide for yourself whether it is risky or not to invest in AMZN.

[hugh3]

Y'know, I agree with you, but I think you're arguing poorly.

one antiquated notation

Just because an idea is old doesn't mean it's bad.

that P/E is the only thing that matters

I hate to say "strawman", but strawman. Is it really saying that P/E is the only thing that matters? I think not, otherwise it wouldn't say things like "top line growth in many ways is far more important than earnings per share."

an idea that isn't taken seriously by anyone close to Wall Street or finance any more

Argument from (dubious) authority?

only perpetuated by "pop" finance drivel such as Fortune

Scare quotes and the use of the word "drivel"?

[smakz]

You're right, I'm not arguing very well. And please, I encourage any one not to take what I say very seriously either. If you want to invest, think for yourself, that is what I was really trying to say.

[hugh3]

Well yeah, I think that pretty much goes without saying. Nobody should ever take a single "here's why I like stock X" article too seriously. But this one does provide some pretty good food for thought for anyone thinking of investing in computer/internet stocks right now.

I think I'd avoid GOOG and AAPL personally, too overpriced. Mind you, I've been saying that about GOOG since the float, so I'm frequently wrong.