Why Is Amazon's Stock So Expensive?
At roughly $3,300 a share, Amazon's (NASDAQ: AMZN) stock price looks expensive, but you can't judge a stock by its price alone. Another way to think about buying a stock is to think about what you would have to pay to own the whole company (assuming you could).
Amazon's current market capitalization is $1.67 trillion. That is what you would have to pay to buy all of Amazon's shares outstanding at their current stock price. That too looks expensive, but it actually may not be when you factor in the company's earnings potential. That high market cap is a reflection of investor confidence that Amazon will grow revenue to levels in line with its overall value.
We all want to see our stocks go up in value over time. But for investors to make a good return on Amazon stock from these levels, the company will need to generate yearly revenue that is reasonable in relation to its current market cap.
Source Fool.com
