Don't Buy Amazon.com. Fear It.

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When investors contemplate Amazon.com (NAS: AMZN) , they shouldn't think of buying shares; they should ponder the many ways this is one scary company out there in the marketplace. Amazon could be renamed The Great Disruptor, given its disruptive and sometimes even deadly influence on a variety of mature businesses.

Here are some of the industries and companies Amazon has disrupted (or is at least trying to disrupt):

Bookstore chains: Borders is bankrupt and liquidated; Barnes & Noble is hanging on for dear life in the dog-eat-dog world of bookselling. Amazon.com stripped them of their every advantage by providing better selections, major convenience, and massive price cuts. And of course, Amazon's Kindle originally set the e-book revolution in motion.

Electronics retailers: Circuit City's gone, and once-mighty Best Buy (NYS: BBY) is weakened. When you discuss what's gone wrong with Best Buy, many, many fingers now point to Amazon more than smaller electronics retailers such as hhgregg (NYS: HGG) and Conn's.

Shoe retailing: Amazon owns Zappos; enough said. Can Gap's (NYS: GPS) Piperlime online shoe site ever do that well with Zappos on the scene? It also can't make life easy on bricks-and-mortar shoe peddlers such as DSW Shoe Warehouse.

Publishing: Amazon's CreateSpace allows artists to self-publish and distribute their work for a pittance. Customers order the works on a print-on-demand basis, taking a heck of a lot of the expense out of the publishing process and creating a win-win for Amazon and DIY artists. The middle-man model of old-school publishing could become yet another anachronism before too long.

Apple (NAS: AAPL) : Amazon's Kindle Fire is, of course, a competitive jab at the iPad. Amazon offers MP3s on its site in direct competition to iTunes, too, but that's old news.

Netflix (NAS: NFLX) : Netflix's mistakes could be Amazon's gain in the nascent and growing streaming video category, as my fellow Fool Seth Jayson recently pointed out.

The cloud. Don't forget the cloud.

Did I forget some? Most definitely. And just because Amazon's competitive presence in some areas hasn't taken a major toll yet, that doesn't mean it never will. Investors should really worry about whether the companies they own are in Amazon's crosshairs, because it's not a good place to be. Amazon has pretty darn good aim and a heck of a lot of firepower.

Here's another Amazonian element investors should fear, at least if they're thinking of buying in: its price. Amazon trades at 104 times forward earnings; its PEG ratio is a monstrously mind-boggling 7.38. The stock is horrifically overvalued. Yes, Amazon's brutal competitiveness translates into major growth, but I can't imagine the kind of insane growth coming to justify such nutty multiples. (For comparison, tech powerhouses Google and Apple are trading at forward P/E ratios of 14 and 10, respectively.)

The simple description of Amazon as an "online retailer" is a serious red herring when you consider the massive reach Amazon has. Don't buy Amazon. Fear it. And keep on the lookout for some temporary pessimism to deliver a serious whack to Amazon's stock price, so you can get in on the future of The Great Disruptor, too.

At the time this article was published Alyce Lomaxowns no shares of any of the companies mentioned. The Motley Fool owns shares of Google, Gap, Best Buy, and Apple.Motley Fool newsletter serviceshave recommended buying shares of Google, Amazon.com, Netflix, Apple, and hhgregg, creating a bull call spread position in Apple, and writing covered calls in Best Buy. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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