Evaluating Amazon's (AMZN) Valuation Following a Recent 7% Decline in Share Price
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 13 2025
0mins
Should l Buy AMZN?
Source: Yahoo Finance
Amazon's Recent Performance: Amazon.com has experienced a 7% pullback in its stock price over the past month, despite continued double-digit growth in revenue and net income, indicating a potential opportunity for long-term investors.
Valuation Insights: The fair value of Amazon is estimated at $234.75, slightly above its recent closing price of $226.19, suggesting modest upside potential, although projections may be conservative due to not accounting for future growth from pipeline projects.
Risks and Considerations: Slowing momentum in Amazon Web Services (AWS) and increasing competition in the cloud sector could pose challenges to growth assumptions, particularly if AI investments do not yield higher margins.
Investment Opportunities: Investors are encouraged to explore other high-growth tech and AI stocks, as well as undervalued companies and dividend stocks, to enhance their investment strategies and capitalize on market mispricing.
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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: 207.920
Low
175.00
Averages
280.01
High
325.00
Current: 207.920
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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- Surging Capital Expenditures: Amazon's projected capital expenditures for 2026 are set to reach $200 billion, significantly exceeding analyst expectations of $150 billion, which has raised market concerns and led to a 15% drop in stock price in February.
- Free Cash Flow Pressure: Amazon's free cash flow plummeted by 71% in 2025, falling from $38.2 billion in 2024 to just $11.2 billion, primarily due to ongoing AI investments, prompting Wall Street to question the prudence of its capital allocation.
- Strong AWS Growth: Despite capital expenditure pressures, Amazon Web Services (AWS) reported $35.6 billion in revenue for Q4 2025, marking a 24% year-over-year growth, indicating robust profitability and demand in the AI sector.
- Long-Term Investment Outlook: While free cash flow may continue to decline in the short term, Amazon's investments in AI infrastructure are expected to yield long-term benefits, particularly through its partnership with Anthropic, enhancing its competitive position in the AI market.
See More
Amazon Could Join $3 Trillion Club in Less Than Two Years
- Cloud Growth: Amazon's AWS generated $128.7 billion in total revenue for 2025, with year-over-year growth accelerating from 17% in Q1 to 24% in Q4, indicating strong demand for AI services will drive future revenue growth.
- Logistics Efficiency: In 2025, Amazon delivered a record 8 billion packages to Prime members in the U.S., a 30% increase year-over-year, by optimizing its logistics network to shorten order travel distances, thereby speeding up delivery times and reducing fulfillment costs.
- Enhanced Profitability: Amazon achieved a net income of $77.6 billion in 2025, up 31% year-over-year, with earnings per share reaching $7.17, and despite a broader tech sell-off, its P/E ratio remains lower than that of the Nasdaq-100, indicating relative stock value.
- Future Growth Potential: Wall Street estimates Amazon's earnings per share will rise to $7.75 in 2026 and $9.39 in 2027, suggesting that if aligned with Nasdaq-100 P/E ratios, Amazon's market cap could reach $3.14 trillion by the end of 2027, showcasing strong market prospects.
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- Pentagon Chooses Grok: Despite safety controversies, the Pentagon has opted to use xAI's chatbot Grok in classified settings, reflecting support for Musk's free speech stance, yet raising alarms about the potential risks associated with Grok's looser controls.
- Leadership Shakeup: The recent departure of co-founder Toby Pohlen from xAI could have significant implications for the company's future, especially as it navigates external pressures and scrutiny.
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- Collaboration with DoD: OpenAI CEO Sam Altman announced an agreement with the U.S. Department of Defense to deploy its AI models in classified networks, demonstrating a commitment to safety and collaboration, thereby enhancing the company's competitiveness for government contracts.
- Alignment on Safety Principles: Altman stated that OpenAI and the DoD reached consensus on key safety principles, including prohibitions on domestic mass surveillance and human accountability for the use of force, which not only reflects the company's ethical stance but also lays a foundation for future collaboration.
- Technical Safeguards: OpenAI will implement technical safeguards to ensure the safety of its models and will deploy personnel to assist the DoD in utilizing these models, aiming to enhance the reliability of the technology and build government trust in its capabilities.
- Industry Call for Fair Terms: Altman emphasized the desire for the DoD to extend the same terms to all AI companies, indicating the company's preference for resolving tensions in the industry through reasonable agreements rather than legal actions, promoting a healthier development of the AI sector.
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- Strong Earnings Report: Amazon's Q4 net sales rose 14% year-over-year to $213.4 billion, showcasing robust performance in both e-commerce and cloud computing, although investor concerns about future spending loom large.
- Cloud Computing Growth: AWS revenue increased by 24% year-over-year to $35.6 billion in Q4, with operating income of $12.5 billion accounting for 50% of Amazon's total operating income, indicating sustained momentum in its cloud business.
- Capital Expenditure Plans: Amazon anticipates investing approximately $200 billion in capital expenditures by 2026, primarily for AI and other tech initiatives, which may exert pressure on the company's cash flow and long-term growth prospects.
- Declining Cash Flow: Amazon's free cash flow fell from $38.2 billion a year ago to $11.2 billion, largely due to a $50.7 billion increase in capital expenditures, reflecting the company's significant investment in expanding its technological infrastructure.
See More
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- Cloud Revenue Growth: Amazon's cloud computing segment saw a 24% year-over-year revenue increase in Q4, reaching $35.6 billion, demonstrating strong performance in the cloud market despite investor concerns over projected $200 billion capital expenditures.
- Strong Advertising Performance: Advertising services revenue hit $21.3 billion in Q4, up 23% year-over-year, providing Amazon with a high-margin revenue stream and further validating its successful diversification strategy.
- Capital Expenditure Outlook: Management anticipates approximately $200 billion in capital expenditures by 2026, which may pressure earnings growth in the short term but reflects confidence in long-term investments in AI and other technology sectors.
- Decline in Free Cash Flow: Amazon's free cash flow fell to $11.2 billion over the past 12 months from $38.2 billion a year earlier, primarily due to a $50.7 billion increase in capital expenditures, prompting investors to monitor the potential impact on the company's long-term growth prospects.
See More
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- Surging Capital Expenditures: Amazon's projected capital expenditures for 2026 are set to reach $200 billion, significantly exceeding analyst expectations of $150 billion, which has raised market concerns and led to a 15% drop in stock price in February.
- Free Cash Flow Pressure: Amazon's free cash flow plummeted by 71% in 2025, falling from $38.2 billion in 2024 to just $11.2 billion, primarily due to ongoing AI investments, prompting Wall Street to question the prudence of its capital allocation.
- Strong AWS Growth: Despite capital expenditure pressures, Amazon Web Services (AWS) reported $35.6 billion in revenue for Q4 2025, marking a 24% year-over-year growth, indicating robust profitability and demand in the AI sector.
- Long-Term Investment Outlook: While free cash flow may continue to decline in the short term, Amazon's investments in AI infrastructure are expected to yield long-term benefits, particularly through its partnership with Anthropic, enhancing its competitive position in the AI market.
See More
Amazon Could Join $3 Trillion Club in Less Than Two Years
- Cloud Growth: Amazon's AWS generated $128.7 billion in total revenue for 2025, with year-over-year growth accelerating from 17% in Q1 to 24% in Q4, indicating strong demand for AI services will drive future revenue growth.
- Logistics Efficiency: In 2025, Amazon delivered a record 8 billion packages to Prime members in the U.S., a 30% increase year-over-year, by optimizing its logistics network to shorten order travel distances, thereby speeding up delivery times and reducing fulfillment costs.
- Enhanced Profitability: Amazon achieved a net income of $77.6 billion in 2025, up 31% year-over-year, with earnings per share reaching $7.17, and despite a broader tech sell-off, its P/E ratio remains lower than that of the Nasdaq-100, indicating relative stock value.
- Future Growth Potential: Wall Street estimates Amazon's earnings per share will rise to $7.75 in 2026 and $9.39 in 2027, suggesting that if aligned with Nasdaq-100 P/E ratios, Amazon's market cap could reach $3.14 trillion by the end of 2027, showcasing strong market prospects.
See More
xAI Faces Safety Concerns Amid Leadership Changes
- Safety Concerns: Various federal agencies have expressed concerns regarding the safety and reliability of Elon Musk's xAI tools, leading to intensified debates within the U.S. government about AI model selection, which could undermine xAI's market credibility.
- Pentagon Chooses Grok: Despite safety controversies, the Pentagon has opted to use xAI's chatbot Grok in classified settings, reflecting support for Musk's free speech stance, yet raising alarms about the potential risks associated with Grok's looser controls.
- Leadership Shakeup: The recent departure of co-founder Toby Pohlen from xAI could have significant implications for the company's future, especially as it navigates external pressures and scrutiny.
- Impact of Major Merger: The merger between xAI and SpaceX is seen as a pivotal move in the tech industry, and despite recent turmoil, this merger may provide new opportunities for future growth.
See More
OpenAI Reaches Agreement with Department of Defense
- Collaboration with DoD: OpenAI CEO Sam Altman announced an agreement with the U.S. Department of Defense to deploy its AI models in classified networks, demonstrating a commitment to safety and collaboration, thereby enhancing the company's competitiveness for government contracts.
- Alignment on Safety Principles: Altman stated that OpenAI and the DoD reached consensus on key safety principles, including prohibitions on domestic mass surveillance and human accountability for the use of force, which not only reflects the company's ethical stance but also lays a foundation for future collaboration.
- Technical Safeguards: OpenAI will implement technical safeguards to ensure the safety of its models and will deploy personnel to assist the DoD in utilizing these models, aiming to enhance the reliability of the technology and build government trust in its capabilities.
- Industry Call for Fair Terms: Altman emphasized the desire for the DoD to extend the same terms to all AI companies, indicating the company's preference for resolving tensions in the industry through reasonable agreements rather than legal actions, promoting a healthier development of the AI sector.
See More
Amazon's Strong Q4 Report Overshadowed by Capital Expenditure Concerns
- Strong Earnings Report: Amazon's Q4 net sales rose 14% year-over-year to $213.4 billion, showcasing robust performance in both e-commerce and cloud computing, although investor concerns about future spending loom large.
- Cloud Computing Growth: AWS revenue increased by 24% year-over-year to $35.6 billion in Q4, with operating income of $12.5 billion accounting for 50% of Amazon's total operating income, indicating sustained momentum in its cloud business.
- Capital Expenditure Plans: Amazon anticipates investing approximately $200 billion in capital expenditures by 2026, primarily for AI and other tech initiatives, which may exert pressure on the company's cash flow and long-term growth prospects.
- Declining Cash Flow: Amazon's free cash flow fell from $38.2 billion a year ago to $11.2 billion, largely due to a $50.7 billion increase in capital expenditures, reflecting the company's significant investment in expanding its technological infrastructure.
See More
Amazon's Cloud Revenue Growth Accelerates
- Cloud Revenue Growth: Amazon's cloud computing segment saw a 24% year-over-year revenue increase in Q4, reaching $35.6 billion, demonstrating strong performance in the cloud market despite investor concerns over projected $200 billion capital expenditures.
- Strong Advertising Performance: Advertising services revenue hit $21.3 billion in Q4, up 23% year-over-year, providing Amazon with a high-margin revenue stream and further validating its successful diversification strategy.
- Capital Expenditure Outlook: Management anticipates approximately $200 billion in capital expenditures by 2026, which may pressure earnings growth in the short term but reflects confidence in long-term investments in AI and other technology sectors.
- Decline in Free Cash Flow: Amazon's free cash flow fell to $11.2 billion over the past 12 months from $38.2 billion a year earlier, primarily due to a $50.7 billion increase in capital expenditures, prompting investors to monitor the potential impact on the company's long-term growth prospects.
See More
