High p/e raises its risk

Article Excerpt

AMAZON.COM $1026.87 (Nasdaq symbol AMZN; TSINetwork Rating: Average) (206266-1000; www.amazon.com; Shares outstanding: 478.0 million; Market cap: $490.8 billion; No dividends paid) will pay $13.7 billion in cash for organic grocery chain Whole Foods (symbol WFM on New York). That firm, and its 460 locations, will continue to operate under the Whole Foods name and as a separate unit of Amazon.com. Amazon spends big to maintain its rapid growth. However, its focus on winning market share holds back its earnings and pushes up its p/e. It now trades at a very high 153.5 times its forecast 2017 earnings—and 48.7 times its estimated 2017 cash flow per share. That adds considerable risk and leaves little margin for error. If the company loses momentum, it could result in a huge downturn for the stock. Amazon.com is a hold. hold…