Why Amazon Is a Web 2.0 Bubble Stock

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Source: Thinkstock

Source: Thinkstock

On December 10, 1999, Amazon (NASDAQ:AMZN) shares established what was then an all time high at $111.94. One year prior to that date, in October 1998, analyst Henry Blodget made a name for himself after setting a then-audacious one-year $400.00 price target for Amazon stock. Be advised that Blodget’s $400 price target did calculate out to a split-adjusted $66.67. In reality, Amazon shares were to actually blow through Blodget’s $400.00 Amazon price target within six short months. From there, Amazon stock was to promptly collapse to $5.97, on September 28, 2001, amid the depths of the dot-com bust. The Securities and Exchange Commission ultimately banned Blodget from the securities industry and ordered the man to pay a $4 million fine. At the time, the career of Henry Blodget paralleled the excesses of cheap money, speculation, and irrational exuberance.

In retrospect, however, Henry Blodget was vindicated, but for what appears to be all of the wrong reasons. Amazon stock closed out the May 16, 2014 trading session having changed hands at $297.70. On January 22, 2014, Amazon did establish an all time high at $408.06 per share, to far outpace Blodget’s original $66.67 split-adjusted price target. Ironically, Amazon may have now emerged again as the poster child for today’s Web 2.0 bubble. This time is no different.

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