Don’t be fooled by the fact that shares of Amazon (NASDAQ:AMZN) have more than doubled since the dot-com days. It has flopped in the short term, from almost $250 in fall 2011 to tally a nearly 20% decline in less than six months.
True, Amazon has been a perennial outperformer … but it’s getting squeezed and could be in trouble. Amazon’s net profit is normally about 5% of revenue thanks to rock-bottom pricing, and it’s investing a huge amount of capital in its Kindle Fire. In fact, the company will pretty much break even in its next earnings report because of a tremendous amount of profits being siphoned off for research and subsidies of the Kindle tablet.
So while Amazon might be above its dot-com valuation, there are hints that its upward momentum is waning.