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Jeff Bezos
Jeff Bezos

Barron’s magazine gave some bearish treatment in a piece over the weekend — saying that the company is “dangerous” for competitors and shareholders, and concluding that Amazon’s share price “could use some cooling off.”

The story (available via subscription) focuses on the increase in Amazon’s share price over the past year even as profits “have all but disappeared.”

The ability to keep profits low gives Amazon an advantage over Wal-Mart and other rivals, but Barron’s raises questions about the ultimate payoff for investors — saying Amazon “enjoys the impunity of a start-up with investors when it comes to demonstrating profit power.”

Amazon CEO Jeff Bezos tackled this topic in his latest letter to shareholders, writing …

Our heavy investments in Prime, AWS, Kindle, digital media, and customer experience in general strike some as too generous, shareholder indifferent, or even at odds with being a for-profit company. “Amazon, as far as I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers,” writes one outside observer. But I don’t think so. To me, trying to dole out improvements in a just-in-time fashion would be too clever by half. It would be risky in a world as fast-moving as the one we all live in. More fundamentally, I think long-term thinking squares the circle. Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align.

But Barron’s has its doubts. “Management says it’s keeping prices low to gain more customers while spending on distribution centers and data farms that will pay off in years to come,” says the article. “But it offers few details to suggest how soon that payoff will come and how large it will be. A lofty stock valuation means gains could stall in coming years even as the company thrives if investors lose some of their eagerness.”

Amazon shares are down about 1.6 percent in trading this morning.

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