Amazon.com, Inc. (NASDAQ:AMZN) is getting ahead of itself. The past six weeks have certainly brought plenty of excitement and gains for AMZN stock investors.

Last month, Amazon shocked the retail world with its bid for high-end grocer Whole Foods Market, Inc. (NASDAQ:WFM) for $42 a share. AMZN had eschewed traditional brick-and-mortar locations. The decision to buy Whole Foods shows that it is willing to bring the fight to traditional retailers in a whole new way.

Stocks of dozens of companies, including rival groceries, big box retailers, mall operators, and packaged foods companies all slumped following the announcement. But that wasn’t enough disruption for one month and Amazon’s moves continued to send shockwaves across the market.

The company next announced that it will roll out a Geek Squad-style tech services unit, a frontal assault on Best Buy Co Inc (NYSE:BBY). Until now, the big-box electronics and appliance retailer has been one of the few firms whose stock has held up during the so-called retail apocalypse. Amazon clearly still has the company in its sights and BBY stock dropped 7% on the news.

Amazon then opened another line of fire, this time against online real estate websites. Zillow Group, Inc. (NASDAQ:Z) and its ilk slumped on news that Amazon will be reaching into that sector, as well.

And this past week ended with the newly minted shares of meal kit producer Blue Apron Holdings Inc (NYSE:APRN) falling to levels almost 40% below their June 29 IPO price, on news that AMZN will soon be a rival.

Great News For Amazon, Right?

AMZN stock has reacted as you might expect in this bull market: by going straight up. In fact, remarkably enough, the rise in AMZN stock on the day it announced the Whole Foods deal coincidentally equaled the amount it will pay.

Owners of AMZN stock have enjoyed several years of almost uninterrupted gains. Nothing has changed on that front, of late. Following the WFM bid news, Amazon stock hit the long-awaited $1,000 mark. After a slight dip, shares have retaken the $1,000 level following the news that it is targeting various other firms with new initiatives.

Clearly, investors think Amazon can do no wrong. And they may be right. It has never paid to bet against founder, chairman and CEO Jeff Bezos.

At this point, Amazon is in a virtuous cycle; the market believes the e-commerce juggernaut will usually succeed, so any risky move, such as buying almost 500 grocery stores, is viewed as a sure-fire winner.

Real Risk Developing

However, there is real risk developing in AMZN stock. It’s almost impossible for any company to take on so many new business ventures simultaneously and not drastically mess up a few of them .

The biggest winners of the late 1990s tended to have this same voracious growth pattern, appearing to devour all potential competitors in sight.

 

Not every company that aims for hyper-growth fails. But the majority do.Amazon’s management team would have enough to do running the world’s leading online retail site and also the top cloud-services business. But no, just within the past month, they’ve decided to branch out into grocery stores, tech installation/repair, online realty, and meal kits. What’s next, are they going to buy an online travel agency next month? A pharmacy? An auto parts retailer? Why stop anywhere, according to the market’s current optimism, Bezos can do no wrong.

Amazon Is A Great Business But It Isn’t Inevitable

Investors have started pricing large swaths of the market as though Amazon is going to take over everything. However, Amazon’s own past history shows a large number of missteps.

Amazon’s hardware efforts largely failed (recent Alexa success notwithstanding). Its phones never went anywhere, and Kindles only took a minor share of the tablet market despite earning a devoted following among readers. Amazon retail has failed to garner meaningful market share in several of the overseas markets it tried to enter, most notably China. Amazon’s music efforts have hardly disrupted Spotify. The list goes on.

We seem to be hitting a point where Amazon thinks it can conquer new markets just by showing up. Yet historically, when companies hit that level of confidence, things often go bad in a hurry.

Flimsy Balance Sheet Stretched Too Thin

Despite the huge run in the price of AMZN stock, the company’s balance sheet remains rather unimpressive. Yes, it has intentionally foregone opportunities to make money in the short-run in the name of brand-building, a strategy that appears to have paid off.

Enron wasn’t content to simply dominate pipelines and U.S. oil and gas trading, it also branched out into international power plants, broadband trading, weather-based futures contracts, and other such exotic things. We know how that ended.

AOL, the era’s tech high-flier, stopped being just an internet provider. It had grand ambitions for a media empire and numerous ancillary businesses. It infamously merged with Time Warner at the top of the market bubble, destroying nearly all shareholder value in both companies. That fiasco is remembered as perhaps the worst M&A deal of all time. It’s worth listening to critics who suggest that Whole Foods may be Amazon’s AOL/Time Warner moment of hubris and overreach.

 

Sooner or later though, the company will need to actually generate profits or at least reliable free cash flows. Amazon has a very capital-light model. They don’t have to invest much to grow the online business. That has allowed the company to operate without generate meaningful profits for a surprisingly long time.

However, venturing into physical, capital-intensive businesses such as grocery stores could change the game. Those Whole Foods’ locations will require intensive spending on upkeep, employees, inventory, and so on. AMZN’s profit margins will also decline, as groceries aren’t a particularly profitable business. Right now, the market values Amazon on a totally different basis from other companies, since its cloud revenues are treated as uniquely valuable.

Once you throw in low-margin revenues that require more employees and capital spending, such as grocery stores and geek teams, investors may re-rate AMZN stock sharply lower to reflect more restrained visions of the future. Furthermore, there is the chance that Amazon bungles one or more of its significant new business initiatives, scaring investors.

Amazon’s best days aren’t necessarily behind it. But the company’s behavior of late should raise eyebrows. If you’re long, closely monitor how its new growth efforts go. AMZN stock could drop in a hurry if this hyper-growth phase starts to sour.

At the time of this writing, Ian Bezek held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek.