Is Amazon A Buy?

I don't know. (What you think I am, a stock tout?)

At its current price of $26.26, Amazon trades at 43 times last year's earnings. That's still rich compared to Wal-Mart's 13 or the 19 of BestBuy. But Google's P/E is 57 (although estimates for next year's profits would put it at 38) and Yahoo's 31 is in the ballpark.

So what's the problem? Amazon is far more like a brick-and-mortar retailer than it lets on. In order to sell most stuff, it has to stock stuff. In order to stock stuff, it needs an assurance of demand. And it's gone off into a lot of different directions without telling the customers.

What Amazon needs is an old-fashioned merchandiser. It needs to determine what  it can sell without stocking it, and have systems in place to deliver it.  Do I really need to buy my shampoo from Amazon? My groceries? My baby products?

Amazon is actually doing some clever things. Its storage business is taking off, writes Om Malik. But these are essentially tech things, Internet things, Jeff Bezos things.

A few years ago Amazon got itself into a legal spat with Wal-Mart for stealing some of its computer people. What it needs to steal now is one of its regional managers.

If Amazon can get a handle on its inventory, and re-align its alliances to reduce its own overhead, it can become a stock worth buying. It had a gross profit of $547 million in the March quarter, on sales of $2.279 billion. But it only brought $51 million of that profit to the bottom line. Those are Sears-like numbers.

The only question is whether Jeff Bezos will understand he has a brick-and-mortar problem before it eats him (and Amazon investors) alive.