The Amazon Dilemma

Many years ago, I had trouble with an order I had placed with Amazon.com (AMZN). I tried to resolve it by going to the web site, but the Help link was stuck in a loop. I also couldn't get a hold of them by phone at the time. I was so frustrated at the time that I wrote a letter to Jeff Bezos, describing my problem and listed a half a dozen ways that he could improve the company's customer service and web site. I don't know if he ever read my letter [a customer service rep did read it and solved my problem], but now the customer service is outstanding.

I recently made an error placing an order with Amazon (yes it was my fault this time) and I wanted to call them up to see if they could correct it. Amazon has a service whereby you type in your phone number and they call you right away. At the time, I thought 'Yeah right, how long am I going to have to sit here to wait for the phone to ring?' However, the phone rang immediately. When I say immediately, I mean it seemed to ring before I took my finger off the mouse button. Then I got a recording that said 'Please wait for a customer service rep.' So I thought 'Yeah right, how long am I going to have to sit here to wait for the customer service rep?' The rep came on the line within five seconds. Yes, he was probably in India but he was very easy to understand, he understood the issue right away, and fixed my problem within about 10 seconds. (Thank you Kevin, and thank you Jeff Bezos.)

I keep turning up new positives (green flags) about Amazon. I thought I knew a lot about the company but I didn't know until recently that it owned imdb.com [Internet Movie Database]. If you have never used imdb.com, it is the largest entertainment related online database in the world, covering info about movies, actors, TV shows, film crews, and video games. It even has some of the most obscure movies you've never heard of. I use imdb about once a week. Why is this important to Amazon even though it's a small segment of the company? Imdb gets its primary revenues from advertising which will constantly grow as more and more movies and television shows are made. They also have IMDbPro, which is a subscription based service for business professionals, which should also keep expanding.

So what is all this leading up to? Back on March 8 when Amazon closed at $38.10 per share, I wrote an article called 'Why Amazon.com Stock could be Up Substantially by Year End'. Some of my readers decided to buy the stock at the time and now with the stock closing at $72.04 yesterday, practically a double, they are wondering if it is time to sell.

I'm a a big believer in taking partial profits as a stock rises and especially after a sharp rise. Amazon has a lot going for it, but it does have an atmospheric P/E of 122 and a high PEG of 3. I'm not making any recommendations, but if I had a stock of a great company that doubled, I would probably sell half the position and let the other half ride.

Author still does not own AMZN, but he should have.