Amazon.com, Inc. (AMZN)

Discount cash flow analysis

Sell Overvalued by 92.1%

5% margin of safety What's this?

close

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.

Spacer
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% $63.27 $62.15 $61.07
Terminal Growth% 0 $63.79 $62.65 $61.55
  +1% $64.33 $63.16 $62.05

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%) - 1 year ago
  • Valuecruncher created a new valuation of $351.33 (overvalued by 54.67%) - 1 year ago
  • SethWellbourne created a new valuation of $143.66 (undervalued by 2.57%) - over 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%) - almost 8 years ago
  • SethWellbourne created a new valuation of $109.00 (overvalued by 10.39%) - almost 8 years ago
  • GordonGekko created a new valuation of $70.97 (overvalued by 9.0%) - over 8 years ago
  • SethWellbourne created a new valuation of $53.54 (overvalued by 32.4%) - over 8 years ago
  • SethWellbourne created a new valuation of $65.61 (overvalued by 8.16%) - over 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%) - 9 years ago
  • GordonGekko created a new valuation of $60.34 (overvalued by 25.51%) - 9 years ago
  • KiwiEMH created a new valuation of $81.16 (undervalued by 0.48%) - 9 years ago
  • GordonGekko created a new valuation of $83.39 (undervalued by 0.34%) - 9 years ago
  • GordonGekko created a new valuation of $76.27 (overvalued by 4.88%) - over 9 years ago
  • sethc created a new valuation of $58.29 (overvalued by 24.6%) - over 9 years ago
  • virtualmark created a new valuation of $44.07 (overvalued by 40.87%) - over 9 years ago
  • TheCrunchBlog created a new valuation of $59.00 (overvalued by 19.54%) - over 9 years ago
  • KiwiEMH created a new valuation of $78.46 (overvalued by 0.33%) - over 9 years ago
  • KiwiEMH created a new valuation of $79.54 (overvalued by 1.2%) - over 9 years ago
  • Sam created a new valuation of $58.11 (overvalued by 27.53%) - over 9 years ago

Comments

Running The Numbers – Amazon ($AMZN) still looks expensive

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/09/running-the-numbers-amazon-amzn-still-looks-expensive/

Our assumptions are revenues of US$19.5 billion in 2008 growing to US$30.5 billion in 2010. We have used an EBITDA margin of 7% in 2008 increasing to 8% in 2010. We used a terminal growth rate of 5%. We used a terminal capital expenditure number of US$375 million. We have used a WACC (discount rate) of 10.5%. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.

Our analysis incorporates the cash and debt on the $AMZN balance sheet – Valuecruncher calculates a net debt number.

Based on our analysis the current share price looks expensive. We recognise that $AMZN has a range of potentially valuable growth options (especially their Web Services platform). Currently it is very difficult to determine a value of these growth options – we have made a broad attempt with our growth projections and terminal growth rate. However, it appears that these options are being valued into the current share price at a level beyond what we are projecting.

By TheCrunchBlog, about 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 334,536
Net Debt (Long-term borrowings less cash): -1,830
Equity Value: 29,797
Number of Shares Outstanding: 425,000,000
Calculated value per share: $62.65

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.