A good way to know when to sell a stock that is about to correct is to watch what the insiders are doing with their stock. In this regard, is it time to sell Amazon? In just the last week or so Jeff Bezos has sold $3.5 billion dollars-worth of Amazon.com stock. Is this an indication that the boss of Amazon.com thinks that is a good time to start taking a profit because the stock is about tank? Or does he simply have so much money that $3.5 billion is pocket change?
Investing in Amazon.com
Amazon.com was founded in 1994 and has traded on NASDAQ since 1997 when it opened at $1.73 a share. During the years running up to the dot com bubble, Amazon.com was one of the few internet stocks that actually was making any money and was not based on hype and fluff. It peaked at $78 before the dot com bubble but fell to the $10 range after the crash. The stock gradually rose in value until it got to the $120 range before it began an almost exponential growth, arriving at $1952 a share in September of 2018. At that point it lost about a third of its value before recovering and then lost about a fourth before climbing to over $2,100 a share today.
The stock does not pay a dividend and has a P/E ratio of 92! All of its attraction lies in its growth prospects. Amazon.com today is the largest provider of AI assistance, cloud computing services, and online marketplace. The company has driven a huge swath of brick and mortar retailors out of business or into much smaller versions of their former selves. They have gone into movie production and online content streaming as well where they compete with Netflix and Disney. It is unlikely that the company will ever go away as it efficiently provides a whole range of valuable services and routinely out-competes all others. But, its growth curve is reminiscent of Microsoft before it corrected and flat-lined for years after the dot com crash. Thus the investment risk for Amazon.com is getting in today at $2,100 a share and seeing it fall to $1,500 only to stay there for a decade!
Jeff Bezos Has Other Investments than Amazon.com
Is it time to sell Amazon just because the largest shareholder decides to take less than 3% of his holdings? Bezos announced three years ago that he would be funding his space flight company, Blue Origin, to the tune of $1 billion a year and he may be planning another expected purchase like when he bought The Washington Post a few years ago. All of that having been said, Bezos has timed his sale at a high point for Amazon.com stock.
How Bad Is the Amazon.com Bubble?
CCN thinks that Amazon stock is in serious trouble. Their argument is that, unlike the other high-flying tech giants that have been driving the market higher, this stock has a hugely-inflated PE ratio and is due for a correction. The situation is similar to that with Tesla which recently benefited from a short squeeze as short sellers were forced to exit their positions and drive prices higher.
There are investors who firmly believe that Amazon is and will remain the wave of the future. But, the question in regard to intrinsic stock value of Amazon.com is just how many new businesses Bezos can grow under one umbrella and how long can he maintain thin profit margins before something breaks?