Amazon vs Alphabet
Yesterday at the close,two to the largest and most traded companies were trading at near identical prices.
Amazon settled at $818.36
Alphabet settled at $817.35
So they were within $1.01 of each other on a $800+ stock price.
Shortly after the close each reported EPS for the current quarter:
Amazon reported $0.52 EPS
Alphabet reported $9.06 EPS
The difference is $8.54 in the favor or Alphabet.
HMMMM. Something has to be wrong with this picture. The stock prices are the same but Amazons EPS are 5.7% of Alphabets EPS ($0.52/$9.06).
Now I know companies are valued differently, but Amazon sure gets a free pass from everyone. It seems to me it is probably because they all have drank the same Kool Aid. So if you talk about how great Amazon is - how they will dominate web services and how they will close all the malls and eventually rule the world - people will simply continue to buy. Right? Since Amazon is $33 lower today (to $784.62) it must be cheap (Alphabet is trading up $18 to $834.84). $1000 here we come!
However, I wonder how academia or perhaps a Series 7 test might phrase a test question about the relationship?
Amazon has EPS of $0.52 and Alphabet has earnings of $9.06 for the quarter. What might you expect the price of each stock to be given what we know?
A) Amazon $47.91 Alphabet $834.84
B) Amazon $417.42 Alphabet $834.84
C.) Amazon $784.62 Alphabet $834.84
D) Amazon will rule the world. So just buy all dips. Alphabet? I liked Google better
E) C and D stupid
