When investors contemplate Amazon.com
Here are some of the industries and companies Amazon has disrupted (or is at least trying to disrupt):
Bookstore chains: Borders is bankrupt and liquidated; Barnes & Noble is hanging on for dear life in the dog-eat-dog world of bookselling. Amazon.com stripped them of their every advantage by providing better selections, major convenience, and massive price cuts. And of course, Amazon's Kindle originally set the e-book revolution in motion.
Electronics retailers: Circuit City's gone, and once-mighty Best Buy
Shoe retailing: Amazon owns Zappos; enough said. Can Gap's
Publishing: Amazon's CreateSpace allows artists to self-publish and distribute their work for a pittance. Customers order the works on a print-on-demand basis, taking a heck of a lot of the expense out of the publishing process and creating a win-win for Amazon and DIY artists. The middle-man model of old-school publishing could become yet another anachronism before too long.
The cloud. Don't forget the cloud.
Did I forget some? Most definitely. And just because Amazon's competitive presence in some areas hasn't taken a major toll yet, that doesn't mean it never will. Investors should really worry about whether the companies they own are in Amazon's crosshairs, because it's not a good place to be. Amazon has pretty darn good aim and a heck of a lot of firepower.
Here's another Amazonian element investors should fear, at least if they're thinking of buying in: its price. Amazon trades at 104 times forward earnings; its PEG ratio is a monstrously mind-boggling 7.38. The stock is horrifically overvalued. Yes, Amazon's brutal competitiveness translates into major growth, but I can't imagine the kind of insane growth coming to justify such nutty multiples. (For comparison, tech powerhouses Google and Apple are trading at forward P/E ratios of 14 and 10, respectively.)
The simple description of Amazon as an "online retailer" is a serious red herring when you consider the massive reach Amazon has. Don't buy Amazon. Fear it. And keep on the lookout for some temporary pessimism to deliver a serious whack to Amazon's stock price, so you can get in on the future of The Great Disruptor, too.
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Alyce Lomax owns no shares of any of the companies mentioned. The Motley Fool owns shares of Google, Gap, Best Buy, and Apple. Motley Fool newsletter services have recommended buying shares of Google, Amazon.com, Netflix, Apple, and hhgregg, creating a bull call spread position in Apple, and writing covered calls in Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.