AMAZON.COM $278.16 - Nasdaq symbol AMZN

AMAZON.COM $278.16 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206- 266-1000; www.amazon.com; Shares outstanding: 455.2 million; Market cap: $128.3 billion; No dividends paid) has invested heavily in cloud computing. This is now paying off with some big contracts: earlier this year, it won a $600-million deal with the U.S. Central Intelligence Agency to build a cloud-computing service.

The CIA has traditionally awarded many of its big computing contracts to IBM (New York symbol IBM), a recommendation of our Wall Street Stock Forecaster newsletter.

IBM has protested the awarding of this deal to Amazon, and the U.S. Government Accountability Office recently recommended that the CIA reopen negotiations. The CIA now has 60 days to say whether it will follow this recommendation.

Whether it retains the contract or not, the CIA deal gives Amazon a lot of credibility with other U.S. government agencies, as well as with clients like big U.S. banks. All these markets offer huge potential.

Amazon’s outlook is positive, and its growing presence in cloud computing adds to its prospects. However, the stock trades at a very high 214.0 times the $1.30 a share that the company will likely earn in 2013.

Amazon.com is a hold.

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