Amazon's DCF Analysis Reveals Intrinsic Value
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy AMZN?
Source: Yahoo Finance
- Intrinsic Value Assessment: According to GuruFocus's Discounted Earnings model, Amazon's intrinsic value is calculated at $189.84, while its current trading price is $199.34, indicating a -5% margin of safety, suggesting the company is fairly valued.
- Growth Stage Assumptions: In the growth stage, Amazon's earnings per share (EPS) without NRI is set at $6.08, with an expected growth rate of 47.30% over 10 years, reflecting the company's strong historical growth potential.
- Terminal Stage Forecast: In the terminal stage, EPS is projected to grow at a conservative rate of 4% for 10 years, ensuring convergence in calculations while highlighting the challenges of sustainable long-term growth.
- Cash Flow Model Comparison: Using the traditional free cash flow model, Amazon's DCF intrinsic value is $8.12, indicating significant overvaluation with a margin of safety of -2354.93%, prompting investors to carefully assess its market performance.
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Analyst Views on AMZN
Wall Street analysts forecast AMZN stock price to rise
44 Analyst Rating
41 Buy
3 Hold
0 Sell
Strong Buy
Current: 207.540
Low
175.00
Averages
280.01
High
325.00
Current: 207.540
Low
175.00
Averages
280.01
High
325.00
About AMZN
Amazon.com, Inc. provides a range of products and services to customers. The products offered through its stores include merchandise and content it has purchased for resale and products offered by third-party sellers. The Company’s segments include North America, International and Amazon Web Services (AWS). It serves consumers through its online and physical stores and focuses on selection, price, and convenience. Customers access its offerings through its websites, mobile apps, Alexa, devices, streaming, and physically visiting its stores. It also manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, Blink, and eero, and develops and produces media content. It serves developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through AWS, which offers a set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Advertising Business Surge: Amazon's advertising revenue grew by 23% year-over-year to over $21.3 billion in the most recent quarter, leveraging its vast user data and traffic, making advertising a new profit growth driver and enhancing its competitive edge in the market.
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Amazon's DCF Analysis Reveals Intrinsic Value
- Intrinsic Value Assessment: According to GuruFocus's Discounted Earnings model, Amazon's intrinsic value is calculated at $189.84, while its current trading price is $199.34, indicating a -5% margin of safety, suggesting the company is fairly valued.
- Growth Stage Assumptions: In the growth stage, Amazon's earnings per share (EPS) without NRI is set at $6.08, with an expected growth rate of 47.30% over 10 years, reflecting the company's strong historical growth potential.
- Terminal Stage Forecast: In the terminal stage, EPS is projected to grow at a conservative rate of 4% for 10 years, ensuring convergence in calculations while highlighting the challenges of sustainable long-term growth.
- Cash Flow Model Comparison: Using the traditional free cash flow model, Amazon's DCF intrinsic value is $8.12, indicating significant overvaluation with a margin of safety of -2354.93%, prompting investors to carefully assess its market performance.
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- Advertising Business Surge: Amazon's advertising revenue grew by 23% year-over-year to over $21.3 billion in the most recent quarter, leveraging its vast user data and traffic, making advertising a new profit growth driver and enhancing its competitive edge in the market.
- Automation Enhances Efficiency: With over 1 million robots deployed across more than 300 global facilities, Amazon has significantly improved its e-commerce profitability by speeding up order processing and reducing handling costs, although this has led to some layoffs, the long-term investment is strategically sound.
- Future Investment Plans: Amazon's $200 billion spending plan for data centers and AI hardware by 2026 has raised some investor concerns, but this strategy is expected to lay a solid foundation for long-term growth for AWS and the overall business.
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- Intrinsic Value Assessment: According to GuruFocus's Discounted Earnings model, Amazon's intrinsic value is calculated at $189.84, while its current trading price is $199.34, indicating a -5% margin of safety, suggesting the company is fairly valued.
- Growth Stage Assumptions: In the growth stage, Amazon's earnings per share (EPS) without NRI is set at $6.08, with an expected growth rate of 47.30% over 10 years, reflecting the company's strong historical growth potential.
- Terminal Stage Forecast: In the terminal stage, EPS is projected to grow at a conservative rate of 4% for 10 years, ensuring convergence in calculations while highlighting the challenges of sustainable long-term growth.
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- IPO Anticipation: Anthropic is eyeing an initial public offering as early as October, with investor interest in this rapidly growing AI startup intensifying, particularly against the backdrop of its ongoing clash with the U.S. government over defense-related AI usage.
- Positive Investor Sentiment: Retail investors are increasingly attracted to KraneShares AI ETF and ARK Venture Fund, which holds stakes in Anthropic, indicating a bullish market sentiment towards the AI sector, especially with DXYZ and VCX being viewed as “extremely bullish.”
- Technological Innovation Outlook: Axios reports that Anthropic and other tech giants are set to release new models capable of hacking sophisticated systems at scale, further heightening market attention on their technological prowess, particularly as the Mythos model is touted to be ahead of other AI models in cyber capabilities.
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- Advertising Business Surge: Amazon's advertising revenue grew by 23% year-over-year to over $21.3 billion in the most recent quarter, leveraging vast data and user engagement to become a significant profit driver, showcasing high-margin potential in the digital advertising space.
- E-commerce Efficiency Gains: Amazon's e-commerce segment is enhancing efficiency through automation, which, while resulting in some layoffs, is a strategic long-term investment that will lower handling costs and accelerate order processing, ensuring sustained profitability in its core business.
- Robot Deployment Milestone: The deployment of over 1 million robots across more than 300 global facilities not only boosts operational efficiency but also positions Amazon to maintain profitability in a competitive landscape, reinforcing its market leadership in e-commerce.
See More
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- Zero-Service Fee Model: Amid global inflation, the platform introduces a zero-service fee model, allowing users to access Istanbul's premier medical clinics directly, avoiding additional costs from agencies and enhancing economic benefits for users.
- Multi-Sector Ecosystem: VisionStay.co/en establishes official partnerships with international travel platforms like Hotels.com and Expedia, ensuring seamless bookings, while also providing direct access to the world's largest marketplaces such as Amazon and AliExpress, guaranteeing users receive official pricing.
- Transparency Mission: Founder Alper Yilmaz emphasizes that VisionStay.co/en is not an agency but a digital publisher, committed to enabling users to reach the source directly, thereby enhancing service transparency and user freedom.
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- Evergy's Growth Potential: Evergy serves 1.7 million customers and expects its adjusted earnings per share to grow by over 8% annually by 2028, primarily driven by AI-related demand, while offering a strong dividend yield of 3.4%, indicating robust shareholder returns.
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