At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
As the news filters out, it looks as if yesterday's twin compliments for (Nasdaq: AMZN) will be good for about a 1% bump in the share price today. Depending on whom you ask, Amazon shares should fetch somewhere between $205 and $210 by this time next year. And the best news of all?

The "whom you ask" in this equation just happens to include two of the best stock pickers in the business.

Let's go to the tape
Ranked in the top 15% of investors we track on CAPS, longtime Amazon fan Jefferies & Co. started off the bullish talk on Amazon yesterday. Reiterating its buy rating on the stock, Jefferies argued that with an estimated 4 million Kindles sold in Q4 2010 alone, Amazon is on pace to sell 10 million of the e-reading gizmos this year, enough to help the company earn $3.65 a share ($0.23 more than previously estimated.)

Now granted, even if Jefferies is right, this means you're being asked to pay 51 times today, in hopes of capturing earnings the company might (or might not earn) a year from now. Pricey? Sure. But before you dismiss the idea out of hand, consider Jefferies' record in the Internet and catalog retail industry:


Jefferies Said


Jefferies' Picks Beating (Lagging) S&P by

Shutterfly (Nasdaq: SFLY) Outperform * 206 points (picked twice)
Netflix (Nasdaq: NFLX) Outperform ** 105 points (picked twice)
Amazon Outperform ** 35 points

Overall, this analyst has beaten the market silly, getting four of its five picks in this segment right over the past four years. Simply put, whatever the valuations might tell you, ignoring Jefferies' predictions has proven a losing proposition in the past -- and it's not the only analyst out there telling you to buy Amazon, either ...

There's also Benchmark to consider. Whereas Jefferies' remarks constituted only a reiteration of its previous (and winning) bet on Amazon, Benchmark yesterday offered us an honest-to-goodness upgrade from its formerly neutral stance on the stock.

Arguing that "solid e-commerce growth" plus "momentum and accelerating demand trends witnessed over the recent holiday period" will drive Amazon's revenue up 30% this year, Benchmark declared itself even more bullish than Jefferies. According to this analyst, Amazon will earn less ($3.50 per share) than Jefferies thinks -- but be worth more, commanding a market price of $210 a share one year from now. And once again, it's the Kindle that's key to Benchmark's buy thesis. Already, Benchmark sees Kindle accounting for 5% of Amazon's annual revenue.

And while it's true Benchmark isn't quite as accurate as Jefferies at picking Internet stocks...


Benchmark Said


Benchmark's Picks Beating (Lagging) S&P by (Nasdaq: PCLN) Outperform ** 193 points
Amazon Outperform ** 44 points (picked twice)
Blue Nile (Nasdaq: NILE) Underperform ** (9 points)

... when you consider the sheer magnitude of how well its winners have outperformed its rare losers, I suspect most investors will forgive Benchmark its occasional gaffes. The fact is, 60% accuracy in Internet hasn't been enough to bench Benchmark -- this analyst remains a first-string player in the industry.

So considering the superb records of both these analysts, and the unarguable superiority of as a business, why is it that I don't own the stock myself? Why do I believe -- strongly -- that the analysts are wrong on this one?

The answer is quite simple, really: Amazon costs too much.

Consider: However good Jefferies and Benchmark may be at guessing Amazon's future earnings, and predicting what investors will pay for those earnings a year from now, the fact remains that what Amazon has actually earned isn't enough to justify the price today. Selling for nearly 76 times trailing earnings (and a less nosebleed-inducing 46 times free cash flow), I find it hard to justify Amazon's price based on consensus forecasts of 27% long-term growth at the company.

What's more, even if you accept the proposition that paying 51 times earnings for a company that's growing 30% this year (and bound to slow down as time goes on) is a good idea, Amazon faces a huge risk that is not today reflected in its stock price: the fact that there's a movement afoot among cash-strapped state treasuries to take away Amazon's "sales-tax-free" status.

As I argued last month, Amazon derives a great deal of its sales success from the fact that it can undercut the prices offered by bricks-and-mortar retailers such as Wal-Mart (NYSE: WMT) and Sears Holding (Nasdaq: SHLD). It does this by claiming exemption from the obligation to collect sales taxes on the goods it sells -- but already, lawsuits are brewing as states fight to collect the sales taxes they're owed, and Amazon's retail rivals cry foul over its tactics.

Foolish takeaway
Even if all this were not true, I believe the price tag on Amazon's stock is already so high as to eliminate the possibility of investors profiting on this stock. When you factor in the unrealized risk of Amazon losing its Internet-enabled sales boost, though, well right there I think you've got your catalyst, Fool.

The second shoe, poised to drop -- crushing Amazon's stock price in the process.

Fool contributor Rich Smith does not own shares of (nor is he short) any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 682 out of more than 170,000 members. The Motley Fool has a disclosure policy.

Wal-Mart is a Motley Fool Inside Value pick. Blue Nile is a Motley Fool Rule Breakers recommendation., Netflix, and are Motley Fool Stock Advisor choices. Wal-Mart is a Motley Fool Global Gains recommendation. The Fool owns shares of Wal-Mart.

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.