Amazon’s on ‘Fire’ Now, But Can it Stay This Hot for Much Longer?

While Amazon.com Inc. (NASDAQ: AMZN ) is a great company, this a U.S.-based
multinational online retailer has a not-so-great stock price. Sure, the stock is
up 15.35% since the beginning of this year, easily outpacing the overall stock
market. But even with the fervor surrounding the new Amazon Fire tablet, its
market cap of $97.58 billion and a price-to-earnings (P/E) ratio of 94.83 give
me great reason to pause, especially given the 63 multiple on 2012 earnings. In
other words, companies this big simply cant grow at the same rate; its simply
the law of large numbers. The news that AMZN will start collecting sales tax in
the upcoming years in California and Tennessee looks like a precursor to
charging sales tax across the United States, lessening a competitive advantage.
Target (NYSE: TGT ) and Wal-Mart (NYSE: WMT ), the two biggest competitors on
the retail side, have made strides recently in their online sites, another
potential headwind. With only 3% margins, the company has to generate enormous
revenue growth to justify its lofty multiple. So while revenues and earnings
will grow, the torrid rate is sure to slow leading to a multiple contraction.
Im looking for AMZN to drop back to the $180 level by March 2012. Based on AMZNs
current market price of $230 and using a target price of $180, a target date of
March 1, 2012, and $10,000 of investment capital, we've identified several
options strategies and a comparative stock trade to consider, should the price
target be achieved at the target date. To play this with options, visit
TradingBlock.com , create a free Instant Login and try the TradeBuilder feature.
Input the ticker, target price and date, and investment amount, and you'll see
several ways to trade that include buying an April put or a put spread, selling
an April call spread, or using some more-advanced strategies. Best of all, you
can see a potential profit-and-loss outline for each strategy. If you set up an
account, you can hit the "Trade" button on your preferred strategy and be on
your way! Create your free login, and get access to these AMZN option trading
strategies by visiting the TradeBuilder here .