Amazon.com, Inc. (AMZN)

Discount cash flow analysis

Sell Overvalued by 92.5%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Amazon.com, Inc., based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2007 2008 2009 2010 2011 2012 2013 2014
 
                 
               
 

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1%
Discount Rate %
0%

1%
  -1% $59.60 $58.52 $57.47
Terminal Growth% 0 $60.11 $59.00 $57.93
  +1% $60.62 $59.50 $58.41

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of $351.48 (overvalued by 55.49%) - 8 months ago
  • Valuecruncher created a new valuation of $351.33 (overvalued by 54.67%) - 8 months ago
  • SethWellbourne created a new valuation of $143.66 (undervalued by 2.57%) - 7 years ago
  • GordonGekko created a new valuation of $94.51 (overvalued by 22.17%) - over 7 years ago
  • beatallica created a new valuation of $74.74 (overvalued by 41.43%) - over 7 years ago
  • GordonGekko created a new valuation of $99.04 (overvalued by 24.82%) - over 7 years ago
  • SethWellbourne created a new valuation of $109.00 (overvalued by 10.39%) - over 7 years ago
  • GordonGekko created a new valuation of $70.97 (overvalued by 9.0%) - almost 8 years ago
  • SethWellbourne created a new valuation of $53.54 (overvalued by 32.4%) - 8 years ago
  • SethWellbourne created a new valuation of $65.61 (overvalued by 8.16%) - 8 years ago
  • GordonGekko created a new valuation of $48.71 (overvalued by 5.58%) - over 8 years ago
  • TheCrunchBlog created a new valuation of $62.65 (overvalued by 10.45%) - over 8 years ago
  • GordonGekko created a new valuation of $60.34 (overvalued by 25.51%) - over 8 years ago
  • KiwiEMH created a new valuation of $81.16 (undervalued by 0.48%) - over 8 years ago
  • GordonGekko created a new valuation of $83.39 (undervalued by 0.34%) - almost 9 years ago
  • GordonGekko created a new valuation of $76.27 (overvalued by 4.88%) - 9 years ago
  • sethc created a new valuation of $58.29 (overvalued by 24.6%) - 9 years ago
  • virtualmark created a new valuation of $44.07 (overvalued by 40.87%) - 9 years ago
  • TheCrunchBlog created a new valuation of $59.00 (overvalued by 19.54%) - 9 years ago
  • KiwiEMH created a new valuation of $78.46 (overvalued by 0.33%) - 9 years ago
  • KiwiEMH created a new valuation of $79.54 (overvalued by 1.2%) - 9 years ago
  • Sam created a new valuation of $58.11 (overvalued by 27.53%) - 9 years ago

Comments

Is Amazon.com (AMZN) really worth over US$70 a share?

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/07/is-amazoncom-really-worth-over-70-a-share/

Our assumptions of revenues for the next three years are US$19.5 billion in 2008 increasing to US$29.5 billion in 2010. We have projected EBITDA margins increasing from 7% in 2008 to 8% in 2010.

We have used a terminal growth rate of 5%. Our view is that AMZN’s growth beyond 2010 will slow – but there is a distance to go yet. Our numbers project 2009 to 2010 revenue growth of 23%. This assumption has a significant impact on the valuation. If you believe AMZN has better future prospects – this will positively impact the valuation.

We have used a WACC (discount rate) of 10.5%. The WACC (discount rate) has a material impact on a discounted cash flow valuation (as does the terminal growth rate).

We used a terminal capital expenditure number of US$350 million. In our opinion capital expenditure should stabilize around this number.

By TheCrunchBlog, almost 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 328,028
Net Debt (Long-term borrowings less cash): -1,830
Equity Value: 30,628
Number of Shares Outstanding: 417,000,000
Calculated value per share: $59.00

Enterprise Value is the present value of the post-tax cash flows for a business into the future.


Calcuation of EV

Where:

  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.


Perpetuity

Where:

  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.


CAPM model

Where:

  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.