Stockhub

Editing Amazon.com, Inc.

Warning: You are not logged in. Your IP address will be publicly visible if you make any edits. If you log in or create an account, your edits will be attributed to your username, along with other benefits.

The edit can be undone. Please check the comparison below to verify that this is what you want to do, and then publish the changes below to finish undoing the edit.

Latest revision Your text
Line 1,090: Line 1,090:
Sources suggest a terminal growth rate within the 3-5% range<ref name=":2">https://valueinvesting.io/AMZN/valuation/dcf-growth-exit-5y</ref>. The DCF model employs an estimate of 3%, but the full range is accommodated in the sensitivity analysis. This figure is used in calculating the terminal value, which, when discounted, results in a present terminal value of approximately $1.199 trillion.   
Sources suggest a terminal growth rate within the 3-5% range<ref name=":2">https://valueinvesting.io/AMZN/valuation/dcf-growth-exit-5y</ref>. The DCF model employs an estimate of 3%, but the full range is accommodated in the sensitivity analysis. This figure is used in calculating the terminal value, which, when discounted, results in a present terminal value of approximately $1.199 trillion.   


In calculating the DCF that forecasts the financial trajectory of a US-based company over the next five years, the risk-free rate is pegged at the US 5-year Treasury rate of 3.87%<ref name=":3">[https://ycharts.com/indicators/5_year_treasury_rate#:~:text=5%20Year%20Treasury%20Rate%20(I%3A5YTCMR)&text=5%20Year%20Treasury%20Rate%20is,long%20term%20average%20of%203.74%25. https://ycharts.com/indicators/5_year_treasury_rate#:~:text=5%20Year%20Treasury%20Rate%20(I%3A5YTCMR)&text=5%20Year%20Treasury%20Rate%20is,long%20term%20average%20of%203.74%25.]</ref>. This figure represents the monthly average rate spanning from January to July 2023.  
In calculating the DCF that forecasts the financial trajectory of a US-based company over the next five years, the risk-free rate is pegged at the US 5-year Treasury rate of 3.87%<ref name=":3">https://www.cnbc.com/quotes/US5Y</ref>. This figure represents the monthly average rate spanning from January to July 2023.  


The summarised estimates from the DCF analysis can be found in the table below.  
The summarised estimates from the DCF analysis can be found in the table below.  
Line 1,174: Line 1,174:
The closing share price for Amazon stocks on 14th July 2023 stood at $134.40<ref>https://www.marketwatch.com/investing/stock/amzn</ref>.
The closing share price for Amazon stocks on 14th July 2023 stood at $134.40<ref>https://www.marketwatch.com/investing/stock/amzn</ref>.


We conducted a sensitivity analysis using a WACC range of 6.5% to 9.0%, and a terminal growth rate span of 1.5% to 4.0%.
We conducted a sensitivity analysis using a WACC range of 6.5% to 9.0%, and a terminal growth rate span of 2.5% to 5.0%.
{| class="wikitable"
{| class="wikitable"
!
!
Line 1,248: Line 1,248:
=== Relative Valuation ===
=== Relative Valuation ===
A comparable trade analysis is conducted to establish a relative valuation for Amazon, supplementing the aforementioned absolute DCF valuation. The analysis takes into account key competitors, such as Alibaba and Ebay <ref>https://www.shopify.com/blog/amazon-competitors</ref>.  
A comparable trade analysis is conducted to establish a relative valuation for Amazon, supplementing the aforementioned absolute DCF valuation. The analysis takes into account key competitors, such as Alibaba and Ebay <ref>https://www.shopify.com/blog/amazon-competitors</ref>.  
The EV/EBITDA ratio, a commonly used valuation metric, takes into account both debt and liabilities relative to the actual earnings. On the other hand, the EV/Revenue ratio serves as an effective tool to determine whether a stock is undervalued or overvalued compared to its industry peers by accounting for the enterprise value and revenue generated by the firm.
The table provides a brief analysis of the ratios and market cap of the several companies in the analysis including their minimum/maximum, median, quartile and mean values.  
In order to consider growth in relative valuation, PEG and growth adjusted EV/Revenue valuation multiples are used. PEG is the ratio of P/E to the annual growth in EPS. Growth adjusted EV/Revenue multiple is the ratio of EV/Revenue to the annual growth in revenue.
{| class="wikitable"
{| class="wikitable"
!Name
!Name
!P/E <ref>https://finbox.com/NASDAQGS:AMZN/explorer/pe_ltm/</ref>
!Mkt Cap (USD)
!EPS 2022 <ref>https://www.macrotrends.net/stocks/charts/AMZN/amazon/eps-earnings-per-share-diluted</ref>
!FY1 EV/Sales
!EPS 2023 <ref name=":7">https://finance.yahoo.com/quote/AMZN/analysis/</ref>
!FY1 EV/EBITDA
!EPS growth
!PEG
|-
|-
|Amazon.com Inc
|Amazon.com Inc
|321.8
|1.4E+12
| -0.27
|2.6
|1.57
|16.2
| -681.5%
| -47.22
|-
|-
|MercadoLibre Inc
|MercadoLibre Inc
|92.3
|5.8E+10
|9.53
|4.3
|16.69
|28.5
|75.1%
|122.85
|-
|-
|Etsy Inc
|Etsy Inc
| -16.1
|1.2E+10
| -5.48
|4.7
|2.33
|17.2
| -142.5%
|11.30
|-
|-
|Chewy Inc
|Chewy Inc
|306.7
|1.6E+10
|0.12
|1.4
| -0.01
|43.5
| -108.3%
| -283.11
|-
|-
|eBay Inc
|eBay Inc
|39.2
|2.5E+10
| -2.27
|2.6
|3.35
|8.0
| -247.6%
|-
| -15.83
|Revolve Group Inc
|1.3E+09
|1.0
|17.6
|-
|Zalando SE
|8.4E+09
|0.7
|12.2
|-
|Sea Ltd
|3.6E+10
|2.6
|18.9
|-
|1-800-Flowers.com Inc
|5.2E+08
|0.4
|5.7
|-
|-
|Alibaba Group
|Next PLC
|23.9
|1.2E+10
|2.34
|2.0
|8.52
|9.7
|264.1%
|9.05
|-
|-
|Vipshop Holdings Ltd
|Vipshop Holdings Ltd
|9.8
|9.8E+09
|1.43
|0.5
|1.88
|5.9
|31.5%
|-
|31.14
|JD.com Inc
|6.1E+10
|0.3
|8.7
|-
|Alibaba Group Holding Ltd
|2.5E+11
|1.4
|6.8
|-
|PDD Holdings Inc
|1.0E+11
|3.3
|13.9
|-
|Allegro.eu SA
|8.6E+09
|3.7
|16.7
|-
|Lulu's Fashion Lounge Holdings
|1.1E+08
|0.4
|5.2
|-
|Verkkokauppa.com Oyj
|1.3E+08
|0.3
|10.3
|-
|ZOZO Inc
|6.5E+09
|4.2
|13.2
|-
! colspan="4" |Summary Statisitcs
|-
|Minimum
|1.1E+08
|0.3
|5.2
|-
|Lower Quartile
|7.0E+09
|0.5
|8.2
|-
|-
|'''Median'''
|'''Median'''
|'''31.6'''
|'''1.2E+10'''
|'''0.8'''
|'''1.7'''
|'''2.8'''
|'''12.7'''
|'''-38.4%'''
|-
|'''10.2'''
|Upper Quartile
|5.2E+10
|3.1
|17.0
|-
|Maximum
|1.4E+12
|4.7
|43.5
|-
|-
|'''Mean'''
|Mean
|'''111.1'''
|1.1E+11
|'''0.8'''
|2.0
|'''4.9'''
|14.3
|'''-115.6%'''
|'''-24.5'''
|}
|}
The EV/EBITDA ratio, a commonly used valuation metric, takes into account both debt and liabilities relative to the actual earnings. On the other hand, the EV/Revenue ratio serves as an effective tool to determine whether a stock is undervalued or overvalued compared to its industry peers by accounting for the enterprise value and revenue generated by the firm.
The table provides a brief analysis of the ratios and market cap of the 15 companies in the analysis including their minimum/maximum, median, quartile and mean values.  
The median EV/EBITDA obtained for the set of 17 companies in the analysis is 12.7, which results in a relatively valued share price of $103.55. The mean EV/Revenue ratio in the industry is 1.7 which results in a relatively valued share price of $97.21.
In order to consider growth in relative valuation, PEG and growth adjusted EV/Revenue valuation multiples are used. PEG is the ratio of P/E to the annual growth in EPS. Growth adjusted EV/Revenue multiple is the ratio of EV/Revenue to the annual growth in revenue.
{| class="wikitable"
{| class="wikitable"
!Name
!Name
!Revenue 2022 <ref>https://www.macrotrends.net/stocks/charts/AMZN/amazon/revenue</ref>
!FY1 P/E
!Revenue 2023 <ref name=":7" />
!EPS growth
!Revenue growth
!PEG
!EV/Revenue
!FY1 EV/Rev
!Growth Adjusted EV/Revenue
!Rev growth
!Growth Adj EV/Rev
|-
|-
|Amazon.com Inc
|Amazon.com Inc  
|514.0
|52.9
|560.8
| -681.5%
|9.1%
| -7.8
|2.9
|2.6
|31.8
|9.1%
|28.8
|-
|-
|MercadoLibre Inc
|MercadoLibre Inc
|10.5
|65.0
|13.5
|75.1%
|86.5
|4.3
|28.5%
|28.5%
|5.2
|15.2
|18.2
|-
|-
|Etsy Inc
|Etsy Inc  
|2.6
|23.4
|2.8
| -142.5%
| -16.4
|4.7
|7.6%
|7.6%
|4.8
|62.1
|63.5
|-
|-
|Chewy Inc
|Chewy Inc
|10.1
|65.9
|11.4
| -108.3%
| -60.8
|1.4
|12.7%
|12.7%
|2.0
|11.1
|15.8
|-
|-
|eBay Inc
|eBay Inc  
|9.8
|11.0
|10.1
| -247.6%
| -4.4
|2.6
|2.6%
|2.6%
|2.5
|99.6
|96.0
|-
|Alibaba Group
|126.491
|132.7
|4.9%
|2.5
|50.8
|-
|Vipshop Holdings Ltd
|14.956
|15.8
|5.6%
|2.5
|44.3
|-
|-
|'''Median'''
|'''Median'''
|'''10.3'''
|'''44.2'''
|'''12.5'''
|'''-125.4%'''
|'''6.6%'''
|'''-10.4'''
|'''2.5'''
|'''3.5'''
|'''47.6'''
|-
|'''Mean'''
|'''98.3'''
|'''106.7'''
|'''10.1%'''
|'''10.1%'''
|'''3.2'''
|'''38.6'''
|'''45.8'''
|}
|}
Amazon had a negative annual EPS in 2022 which results in a negative EPS growth and PEG. Therefore, this multiple is not used to obtain a valuation. It has both a high PE and EV/Revenue multiple compared to the industry median, which usually implies that the stock is overvalued.
The PEG multiple results in a share price of $111.47 while the growth adjusted EV/Revenue results in a share price of $186.18.
 
On the other hand, Amazon has a noticeably lower growth adjusted EV/Revenue multiple (31.8) compared to the industry median (47.6). This results in an implied share price of $211.09, which is significantly higher than the current share price.


== Appendix ==
== Appendix ==
Please note that all contributions to Stockhub may be edited, altered, or removed by other contributors. If you do not want your writing to be edited mercilessly, then do not submit it here.
You are also promising us that you wrote this yourself, or copied it from a public domain or similar free resource (see Stockhub:Copyrights for details). Do not submit copyrighted work without permission!
Cancel Editing help (opens in new window)

Templates used on this page:

Retrieved from ‘https://stockhub.co/research/Amazon.com,_Inc.’