3 Reasons to Sell Amazon.com Today

By Dave Mock | More Articles
December 4, 2009 | Comments (5)

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The turmoil in the markets makes it too easy to justify selling any stock these days. Yet, while panic never helps investors, it's still a good idea to play devil's advocate with investments.

Consider online retail king Amazon.com (Nasdaq: AMZN ) . Though the company continues to impress, you'll find that more than a few of the 4,267 Motley Fool CAPS members weighing in on it offer reasons to be bearish.

Here at the Fool, we like to consider both the good and the bad sides of an investment, so I'm highlighting three of the main bearish arguments on Amazon today. Be sure to read the bullish side as well, and then weigh in with your own comments below or rate Amazon in CAPS.

1. Overvalued
I know, I know. Who hasn't heard that Amazon's shares are overvalued? They've recently reached their highest prices ever on news of a strong quarter, and many investors are asking -- is it worth it? Amazon's valuation now dwarfs those of big-box retail competitors such as Costco (NYSE: COST ) and Target (NYSE: TGT ) , and some CAPS members say that the company's wild growth potential just doesn't justify the current price.

2. Price competition
Amazon is already familiar with competitors like Wal-Mart (NYSE: WMT ) trying to lure away its business, but competition is expected to increase. In addition to competition for the Kindle reader from Sony and Barnes & Noble (NYSE: BKS ) , Amazon has to contend with eBay (Nasdaq: EBAY ) and others, which could lead to lower prices chipping away at margins. It's a threat that has been cited for years, but one that should still be considered.

3. State of the economy
Although many investors think Amazon is a much stronger business than others like Overstock.com (Nasdaq: OSTK ) , many are still concerned about the economy's effects on consumer spending in the future. The company may get a boost from holiday sales, but with continuing weak economic data, many CAPS members expect more economic pain and prefer to sit on the sidelines.

Of course, Amazon has thrived despite past obstacles. But the question of its future viability is why CAPS is such a great resource. To see details of what CAPS members are saying now about Amazon, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts to this story in the comments box below.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

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Fool contributor Dave Mock is three for three in beating his son at chess, but he knows his days of dominance are limited. He doesn't own shares of companies mentioned here. Amazon, Costco, and eBay are Stock Advisor selections. Costco and Wal-Mart Stores are Inside Value picks. The Fool owns shares of Costco. This year, the Fool's disclosure policy isn't waiting for all the guests to arrive and will crack open the eggnog when it darn well feels like it.

Read/Post Comments (5) | Recommend This Article (7)

Comments from our Foolish Readers

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Report this Comment On December 04, 2009, at 2:36 PM, madmilker wrote:

One reason not to ....Made In America... with Wal*Mart moving their Global Procurement Offices to Hong Kong and than to China years ago....and taking tat hyphen out of the name and puttin' in tat big single star...and the fact they put 95% China made in all their stores in China....the above reason is good enough for me.
Report this Comment On December 04, 2009, at 2:58 PM, willisworn wrote:

This article is about 10 years behind...
Report this Comment On December 04, 2009, at 3:10 PM, Patricia013 wrote:

madmilker - I understand what you're saying but MOST stores are carrying Chinese junk - its rare as hen's teeth these days to find made in America products even in some "high class" stores! This problem is not just Walmart's.
Amazon will rule this holiday season for sure. I understand that Walmart and some of the others will be breathing down their necks but Amazon has a solid business model that they've been sharpening for years now. Won't be that easy to take their buyers away from them. Personally, I've done all my online shopping with them and am pleased as punch. If something does go wrong, they make it right! No excuses!
Ebay is dying - sellers have been saying that for the past two years. Get it through your heads that as long as present management reigns Ebay will continue its downhill path. They no longer have the traffic since the site has become cluttered and difficult for buyers to find what they want...and it just keeps getting worse. I know, I've been selling there for the past 11 years!
Report this Comment On December 04, 2009, at 5:22 PM, desertjedi wrote:

Wal-mart...um, I feel dirty when I shop there. And their online store...why would I go there? Their online selection of items, just like any big-box online store is way too limited.
You're absolutely right, Patricia. Ebay is a dead-man-walking. Years ago, I used to buy and sell stuff but now Ebay is a joke. I only go there on extremely rare occasions like to look for odd stuff like old 8x10 glossies of Van Halen.
I buy EVERYTHING at Amazon: books, music, applicances, bike seats, software, etc., etc., etc. You name it. There is no shopping experience remotely comparable. I get a massive selection of items when I search and the prices are the best I can find.on the net.
And who else has the "magic"? When I shop I end up going off on crazy tangents and end up buying I stuff I had no idea I wanted.
When the market tanks, I'll be sure to get some AMZN. And speaking of dead-men-walking....when is this market going to tank?
Report this Comment On December 04, 2009, at 7:10 PM, greenwave3 wrote:

While AMZN is a strong business and is growing at a time when businesses are suffering, AMZN stock is severely overpriced, with about 10 years of growth already built into the price. Take profits and buy back in under $100.

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