ANALYST PRICE TARGETS for AMZN
Citigroup $67
Morgan Stanley $56
Merrill Lynch $53
JP Morgan c.$45
Morningstar $40
What does this tell you?
AMZN is so overly bought, and it is heading down.
Using Amazon’s upper end EBIT guidance for FY07 ($563M) gives us a forward valuation of 48x/EBIT. In addition to being an absurd multiple on its own right, this is well above EBAY (20-25x) and GOOG (25x-30x), both of whom I would argue have more sustainable competitive advantages, more attractive margins, and as good if not better growth prospects than AMZN. Even if we assume AMZN is worth the high end of GOOG’s EBIT multiple, the stock would be worth about 40% less than it is now. If use consensus forward P/Es rather than EBIT, the numbers look even worse: 70x 2007 for AMZN, 33x for GOOG, and 23x for EBAY. Using GOOG again as the upper end of a market valuation would result in a drop of 0ver 50% from current levels. Using EBAY (arguably a more fitting comp) would result in 67% drop.
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