Dear Mr. Berko: 

I bought 100 shares of Amazon.com Inc. in 2009 at $53 and still own it. My broker thinks I should buy another 100 shares and suggested that I use my fully paid-for shares as margin to purchase another 100 shares. I think that e-commerce is a fantastic business and that Amazon is the best. But I would appreciate your opinion. 

W.P., Joliet, Ill.



Dear WP: My compliments on your purchase of Amazon.com (AMZN-$304) at $53. In fact, I’m impressed that you had the courage to continue to hold the stock as the shares moved up 251 more points. AMZN is a fine company, but the shares are trading at a price where only fools and angels have the guts to own it.

This year, AMZN expects to report $77 billion in revenues and post earnings of $1.35, and the 2014 consensus suggests revenues of $92 billion and earnings of $3.25. But you must be mindful that AMZN trades at 90 times 2014’s earnings. Do you recall when Microsoft, AOL, eBay, Expedia, Orbitz and Yahoo traded at 90-plus times earnings? Today these issues trade lower than they did six or seven or nine years ago. Stocks that trade at 90 or 120 times earnings are not investments; they’re speculations. Sometimes good but most times bad. And your broker ought to be gutted for suggesting that you use your 100 shares of AMZN in a margin account to purchase a second 100 shares at today’s price. AMZN’s revenue growth has been phenomenal in the past dozen years, but inconsistent net profit margins have created a rocky road for earnings. A changing Internet landscape – with competition from Google, Apple, Yahoo and Wal-Mart, which offer competing e-commerce websites, comparison shopping sites, online payment services, auction marketplaces and ad search engines – will be disruptive to the AMZN business model. And a changing regulatory landscape that forces out-of-state retailers to collect sales taxes dispels AMZN’s low price perception, enabling bricks-and-mortar retailers to be more competitive.

Online revenues will continue growing in the double digits for the foreseeable future. In 2012, online sales in the U.S. were $225 billion, up 16 percent from 2011. Online purchases account for approximately 5 percent of consumer sales and may easily grow to 10 percent by 2017, according to Forrester Research. Others believe that online sales could rise as high as 15 percent by 2020.

Still, if you want to invest in online sales growth, consider Wal-Mart (WMT-$76.82). E-commerce at WMT is run as a separate business with dedicated headquarters in California. It is called Walmart.com and has its own CEO and staff, purchasing merchandise specifically for the website. Last year, WMT’s online revenues were $7.5 billion. This year, Walmart.com expects to post $10.2 billion in revenues, and in 2014, revenues may grow to $13.8 billion. E-commerce is now a top priority, and WMT’s distribution network of 4,000 stores and 158 warehouses (AMZN has fewer than 20 locations) has become a wonderfully efficient way to deliver a computer, a camera, a TV set, underwear, books and vitamins. And WMT trucks crisscross America every day replenishing these locations. More than 90 percent of America’s population lives within 14 miles of a Wal-Mart, so workers with shopping carts will just pluck items from store shelves, package them and mail ‘em out to millions of WMT customers. WMT is also installing lockers in some of its stores, which will allow customers to pick up merchandise they ordered online.

This year, more than 2 percent of WMT’s $470 billion in revenues will derive from online sales, and by 2020, observers expect online revenues to reach $70 billion, or 10 percent of expected revenues. Be mindful that WMT now sells more food than Kroger and Safeway combined, and management accomplished this in just 15 years. In that same time frame, 31 supermarket chains declared bankruptcy. WMT has the money, the buying power, the technology, the distribution network and the human capital to easily compete against AMZN. And a few Thanksgivings from now, lots of Americans may be purchasing their turkeys online from WMT.

Anyhow, WMT pays a dividend, and AMZN pays zip.