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Why Amazon Is Poised to Underperform

By Brian D. Pacampara, CFA - Apr 3, 2013 at 1:15PM

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Market-lagging returns could be written in this 2-Star.

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online retail giant Amazon.com (AMZN -7.16%) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Amazon and see what CAPS investors are saying about the stock right now.

Amazon facts

Headquarters (founded)

Seattle (1994)

Market Cap

$118.4 billion

Industry

Internet retail

Trailing-12-Month Revenue

$61.1 billion

Management

Founder/Chairman/CEO Jeff Bezos

CFO Thomas Szkutak

Return on Equity (average, past 3 years)

9%

Cash/Debt

$11.5 billion / $4.4 billion

Competitors

Apple

eBay

Wal-Mart

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 21% of the 6,812 members who have rated Amazon believe the stock will underperform the S&P 500 going forward.

Just last month, one of those Fools, All-Star reddingrunner, succinctly summed up the Amazon bear case for our community:

I've always avoided shorting crappy stocks on CAPS as a cheap way of scoring points (not realistic in the real world). But I think Amazon is one of the greatest companies in the world. I've often wished I could buy it. But it really is ridiculously overvalued. Maybe it will soar in the next year. But in five years it will have a P/E below 30, probably well below.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

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Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$2,142.25 (-7.16%) $-165.12
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$122.43 (-6.79%) $-8.92
Apple Inc. Stock Quote
Apple Inc.
AAPL
$140.82 (-5.64%) $-8.42
eBay Inc. Stock Quote
eBay Inc.
EBAY
$44.94 (-4.22%) $-1.98

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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