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Shareholders punish Amazon with whole new multiple

Shareholders have punished Amazon with a whole new multiple. The $165 billion internet retailer chalked up another stunning quarter of growth - revenue rose 23 per cent. Investors' devotion to this figure over the years, rather than the at best anemic bottom line, explains why the stock now trades at 112 times next year's expected earnings, according to Reuters data.

Now, though, the $126 million loss in the three months to June, with worse to come, has investors worried. They wiped out $16.5 billion of value after hours. That's more than six times the $2.5 billion of total net income Amazon has booked since its initial public offering in 1997.

The company's founder and chief executive, Jeff Bezos, has at least been clear from the start that the company takes the long view. In his eyes, Amazon is building an unsurpassable retailing and logistics machine. Running the company at about breakeven permits him to invest heavily and snatch available opportunities. That ought, eventually, to mean bumper profits down the road. Investors have largely agreed, hence the company's outsize market value.

Bezos keeps spreading into new markets. In the second quarter Amazon released a mobile phone with head-tracking, games for the phone, two original children's television series, expanded grocery delivery - and launched new cloud software for business. The wait for Amazon to gush profits appears nearly endless. Thursday's reaction may end up just being a temporary setback. But the size of the drop suggests shareholders may be starting to wonder if Amazon is getting lost in a limitless jungle of Bezos' ambition.