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Amazon bulls and bears: Room to rise or overvalued?

Amazon has more than 240 million active customers. At its peak, the online retailer's massive network of fulfillment centers can process more than 425 items per second.

It's a far cry from the mid-1990s. Back then, founder and CEO Jeff Bezos had only a few hearty colleagues working alongside him at his online bookstore, and they often labored into the wee hours of the night to fulfill the orders themselves.

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Amazon went public in 1997, and its stock is up more than 15,000 percent since then. Despite bringing in billions of dollars in revenue, it has barely turned a profit. Investors wonder how high it might go, and their ranks are divided between the bulls, who believe Amazon stock still has room to rise, and the bears, who think the company is overvalued.

An employee stacks items to be shipped at the Amazon.com Inc. fulfillment center.
Getty Images
An employee stacks items to be shipped at the Amazon.com Inc. fulfillment center.

"I think that Wall Street loves the unknown, because the unknown provides hope," said Sucharita Mulpuru, Forrester Research analyst and an Amazon skeptic. "And where there is hope, there is a case to be made that the answer is a really, really big payoff at the end of the rainbow."

Mulpuru estimates that Amazon actually loses billions of dollars in the process of selling and shipping goods but makes up for it with revenue from other sources such as advertising, Amazon Prime membership fees and Amazon Web Services. She also predicted that if it were to raise prices significantly to increase its revenue, customers would abandon it.

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Veteran investor Bill Miller of Legg Mason has a more bullish view. He said that Amazon's customer base can withstand a price increase, due to the company's well-established combination of service and trustworthiness. For that reason, he said, the stock is properly valued.

"The market is clearly rewarding Amazon's operating strategy, and I believe it's rationally rewarding it," he said. "I think that's what the skeptics are missing, that there's a good, fundamental reason for it."

CNBC reports on the spectacular growth of the online giant Amazon. "Amazon Rising" premieres Sunday, June 29 at 9 p.m. ET/PT.

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