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The Case For — and Against — Amazon Stock

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Waiting for Their Pitch

By Marc Bastow, assistant editor

The great and recently departed Baltimore Oriole manager Earl Weaver had a very simple philosophy on how to win baseball games: pitch well, play solid defense, and wait for the 3-run homer to crush the competition.

That’s how I see Amazon (NASDAQ:AMZN).

I’ve been down this road before with Amazon, and to me Amazon is always getting runners on base while waiting for that 3-run homer. Think of the number of businesses where Amazon is making headway — if not changing the industry — and you can see why investors get into the stock despite its fairly absurd 160 forward P/E ratio.

Amazon is deep in the tablet business, competing fiercely with Apple (NASDAQ:AAPL), Barnes & Noble (NYSE:BKS) and Google (NASDAQ:GOOG) for market share with its Kindle Fire line; the online streaming business now has Amazon’s Prime Plus to compete with Netflix (NASDAQ:NFLX) and Hulu; with its “same-day delivery” model the company is jumping all over bricks-and-mortar superstores like Costco (NASDAQ:COST) for their business and probably making eBay (NASDAQ:EBAY) just a little nervous.

Oh, and have I mentioned its nascent Web Services business, which powers some of the most popular sites on the Web? There’s big money in cloud computing, and Amazon’s a leader here, too.

Sure, the stock is pricey, and the company hasn’t yet found the magic formula to “manage” earnings estimates for the Street, but they’re putting people on base every inning, and sooner or later that 3-run bomb is coming … and they will rule the world.

Earl would love these guys.

Marc Bastow is an Assistant Editor at As of this writing, he was long AAPL.

Article printed from InvestorPlace Media,

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