Let's start with the valuation discount. The chart below shows that AMZN trades at EV/S of ~3x, at the low end of the range for its peer group comprised of FB (15x), GOOG (5x) and MSFT (4x). The trick here is to use EV/S rather than P/E, because if you read CEO Jeff Bezos' shareholder letters, it is abundantly clear that he is not (never was) interested in serving the shorter-term interests of shareholders, in favor of building great value for the longer term – in other words, his focus is likely not on maximizing (shorter-term) EPS.