Amazon (AMZN) Stock Overpriced?

Analysts often argue the value of Amazon stock and question whether it is priced correctly. Amazon stock currently prices at $184.04 (April 11 4:00 p.m.). The online retailer giant has more than doubled its stock price, and its P/E ratio currently exceed that of almost all major internet companies. Profits are growing, sure, but there is very little rational about current price levels.

When it comes to free cash flow, Amazon is priced just fine for a fast-growing market leader. What's that? Amazon is also packing a stratospheric top-line multiple, too? Target, Wal-Mart, and Amazon.com are all getting by on 3% profit margins, yet Amazon's price-to-sales ratio is roughly four times greater. Well, here's where we have to consider digital delivery as the means to chunkier margins. Amazon's Prime membership plan is also a winner; it lets patrons pay $79 a year for free two-day shipping of all Amazon-warehoused goods. If you've met someone on Prime, you know that nearly every online shopping experience they have begins and ends with Amazon.com. The convenience of low prices and free two-day delivery -- or just $3.99 for overnight shipments -- is a huge loyalty-builder. Amazon will continue to gain market share, since the Prime moat can't be copied by a smaller rival without its e-tail trust, experience, and breadth of merchandise.

Is Amazon overvalued? No. Is Amazon undervalued? Sadly, it's not. A pullback shouldn't surprise even the most ardent of bulls. However, given the online retailer's momentum, girth, and future catalysts, it's hard to bail on it. Especially as we head into the holiday season, which Amazon.com has historically owned.