Wal-Mart Stores, Inc. (WMT), Amazon.com, Inc. (AMZN): This Teflon Stock Hits a New High

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The same process is bound to play out at Amazon.com, Inc. (NASDAQ:AMZN), and the only question is how quickly growth will decelerate. If you measure Amazon by “gross merchandise value” by including total sales generated by third-party sellers on Amazon’s site, Amazon already generates nearly $100 billion in annual sales (or more, based on some estimates). Just as Wal-Mart Stores, Inc. (NYSE:WMT)’s growth eventually hit a wall as it ran short of new markets and categories to penetrate, Amazon’s will, too.

Foolish bottom line
I expect Amazon.com, Inc. (NASDAQ:AMZN)’s revenue growth rate to slip below the 20% threshold for good in the next two to three years. At some point further down the road — perhaps 10 years from now, perhaps 15 — the growth rate will drop into the single digits.

There’s nothing unusual or “bad” about any of this; Amazon.com, Inc. (NASDAQ:AMZN)’s business is clearly very healthy. The problem is Amazon’s runaway stock price. Not only does the stock have a forward P/E above 100, but it would have a very high valuation even if operating margins immediately returned to historical highs.

Analysts’ uber-bullish expectations are setting up long-term investors for disappointment down the road. The company’s long-term upside simply cannot justify today’s stock price. Eventually Amazon.com, Inc. (NASDAQ:AMZN)’s Teflon will wear off, and when it does, the stock is likely to drop significantly.

The article Amazon.com: This Teflon Stock Hits a New High originally appeared on Fool.com.

Fool contributor Adam Levine-Weinberg is short shares of Amazon.com. The Motley Fool recommends Amazon.com and eBay. The Motley Fool owns shares of Amazon.com and eBay.

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