A tale of two companies

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

A tale of two companies
A tale of two companies
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