Amazon Stock Analysis (NASDAQ:AMZN)

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$845.61 $1.77 (0.21%) AMZN stock closing price Mar 24, 2017 (Closing)
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Amazon
Updated on : Mar 24, 2017
previous close
AMZN 845.6 (0%)
S&P 500 2344 (0%)
Closing Price On: Mar 24, 2017
stock rating
RATING: ★★★★★★★★★★ (0/5)
Industry :
Internet Commerce
Sector :
Retail-Wholesale
5 Quarter Revenue
Revenue Growth
2016-Q4
$billion
%
YOY GROWTH
Compared to the industry
Long Term Growth
5 Year CAGR:
23.1%
Operating Profit
Operating Margin:
3.1%
Sector Average:
7.3%
5 Quarter Net Profit
Net Margins
2016-Q4
%
LTM Margin
Compared to the industry
Debt/Equity Ratio
Debt:
7.69B
Debt/Equity Ratio:
 0.4
Compared to the industry
Cash Flow
Operating cash flow:
$10.65B
Net Income:
$749M
PROS      CONS
Recent Growth
Long Term Growth
Cash Flow
ROIC
FCF Margin
Operating Margins
Net Margins
High Debt Burden
PE Valuation
PS Valuation
Rating: ★★★★★★★★★★ (0/5)
Relative Valuation
AMZN PS :
3
Industry PS :
0.7
Sector:   Retail-Wholesale.   *PE adjusted for one time items.
Other Metrics
Return on Invested Capital:
16.5%
Return on Equity:
14.5%
Free Cash Flow Margin:
19.8%
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Amazon Analysis Video

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Amazon’s revenue has constantly climbed higher as the company is putting all its efforts to expand its topline. This has led to the creation of massive infrastructure causing Amazon’s assets to increase to over $65 billion. Amazon’s stock analysis highlights the contradiction in the exponential growth of its topline and its non-existent bottom line. After over two decades of operations many investors had started questioning if the zero profit business model of the company will allow it to survive in this heavily contested arena in the future.

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Amazon.com, Inc. Stock Rating (2.8/5)

Should you buy AMZN stock?

  • Amazon sales grew by 22.4% year on year in 2016 Q4.
  • Revenue growth has been tremendous with a compounded annual growth of 23.1% over the last 5 years.
  • The company has an operating cash flow which is 14.2 times the net income.
  • Amazon has an attractive ROIC (Return on Invested Capital) of 16.5%
  • The company has a healthy free cash flow margin of 19.8%.

Should you sell AMZN stock?

  • Amazon had an unimpressive average operating margin of 3.1% during the Last Twelve Months (LTM).
  • Amazon's LTM Net margins were poor at 1.7%.
  • Amazon has a debt/equity ratio of  0.4, which is worse than the average in the Retail-Wholesale sector.
  • Trading at a PE ratio of 172.2, AMZN stock is overvalued in comparison to industry average multiple of 18.4.
  • The company is trading at a price to sales multiple of 3, which is overvalued in comparison to the Internet Commerce industry average multiple of 0.7.

Comments on this video and Amazon stock

user profile picture
User on Amazon stock analysis ($745.72)
neutral
You're looking at the new age Amazon is the old Walmart of the early eighties where a small investment now could benefit you in the tens of thousands of dollars real soon
4 reply
Davep on Amazon stock analysis ($521.38)
bullish
Rise in Amazon Stock can be the effect of success in its alliedservices like Amazon Prime and Web services i.e. cloud computing as stated in this article http://www.profitconfidential.com/stock/... Can this be the real reason and is it expected to grow even higher in the near future?
2 1 reply
user profile picture
Vikram on Amazon stock analysis ($540.26)
bearish
Hi
You might find these articles interesting. Two contradictory views on Amazon. This is a bullish view by a guest author http://amigobulls.com/articles/amazon-co...
and a bearish view by another guest author http://amigobulls.com/articles/amazon-stock-is-up-70-percent-ytd-the-risks-and-rewards
1 2
user profile picture
johnwboyd on Amazon stock analysis ($510.55)
bullish
Amaz..ing how they are over $500/ share with no profits. How do you figure?
1 1 reply
user profile picture
virendra on Amazon stock analysis ($504.72)
bearish
Amazon is over $500/share. I see this due to three factors: Manipulation of news in favour of the company (http://seekingalpha.com/article/2781915-... Blowing the AWS profitability out of proportion by Amazon bulls and Analysts hiking price targets for the stock, which is not something i would trust given that Institutions hold close to 70% of the stock (http://www.nasdaq.com/symbol/amzn/institutional-holdings). The company continues to underprice its services with the promise that earnings growth will follow, something which hasn't happened for over a decade.

Amazon is a great service provider, but a hugely risky investment. The ride higher will only end in a bigger fall, though the exact time is hard to tell.
3 2
user profile picture
GrowthInvestor on Amazon stock analysis ($341.96)
bullish
$AMZN fire tv which promises to be more for the same price already has a built in audience.. another offering to make the current amazon subscribers stickier.. smart move by Bezos http://slant.investorplace.com/2014/04/a...
3 reply
user profile picture
lisajohn on Amazon stock analysis ($351.63)
bearish
Google could well be on the way to plunder the 'cloudy' dreams of Amazon. Yet another price cut from the online search giant. http://arstechnica.com/information-techn...
2 reply
user profile picture
viren@amigobulls on Amazon stock analysis ($371.51)
bearish
AMZN
Faced with the mounting pressure of sustaining topline growth, Amazon.com looks set for another revenue miss in Q1 2014 as Accounting changes in ebook revenue recognition also fail to bail the e-commerce giant. The future looks harder with the accounting change effect wearing off post Q1 2013. Watch Q2 2014 guidance keenly! We agree with Paulo Santos. http://seekingalpha.com/article/2088613-...
1 1 reply
user profile picture
alxvallejo on Amazon stock analysis ($540.26)
bullish
Well I guess you were crazy wrong with that one
user profile picture
oracleofwallstreet009 on Amazon stock analysis ($370.53)
bearish
The time for a transition to an earnings focussed model has come Mr. Bezos. Amazon attempts to turn black through raises in Amazon prime memberships and increasing the minimum free shipping limit on Amazon.com. The risk of losing users is huge which could result in further slowdown. The risk is clearly ahead of you.
2 reply

Amazon’s price trend has reflected this debate which led to a massive fall of over 20% in the stock’s value in 2014. However, the stock has recovered as the Amazon Web Services has helped Amazon to establish a stable bottom line. Amazon stock price history shows that the stock has performed much better than its competitors since the financial recession. The company has crossed an annual revenue run rate of over $100 billion. Even at that scale the company continues to show a growth of over 20%. Amazon’s financial analysis also shows a lot of room for cost cutting, which should help the company to boost its profits.

Amazon PE ratio chart shows a high valuation. However, Given the strong growth in Amazon topline and the recent bottom line strength, Amazon stock should be able to outgrow its valuations. The overall revenue growth and market share are more important for investors. Amazon Web Service (AWS) is the market leader in its category albeit facing huge competitive pressure. Its e-commerce business is also more diversified with stronger infrastructure than other competitors. However, the future of the company will be based on how well it is able to withstand the competitive pressures on all flanks and the overall cost efficiency of its business model.