Forget about its business, Amazon Inc.’s price is too high, according to Smead Capital Management’s Chief Investment Officer Bill Smead.
“The analysts are looking at the underlying business and they’re saying, ‘hey there’s nothing wrong with Amazon’s business,’ and they’re absolutely right,” Smead said on Bloomberg TV. “The problem is at that price, history would argue there’s virtually no chance to succeed over five to 10 years.”
Smead said this is what happens when shares reach “extremely” high earnings ratios, anything over 60, and Amazon’s is above 300.
He pointed to what happened in the past to other big market names with solid businesses and high earnings ratios: RCA in 1929, The Walt Disney Co. in 1972 and Cisco Systems Inc. in 1999/2000.
Amazon shares slid 1.4 percent after President Donald Trump said his concerns with with the company predate his election, a day after a report that he’s “obsessed” with regulating it.