Amazon Stock Analysis (NASDAQ:AMZN)
Amazon Analysis Video
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.
Amazon.com, Inc. Stock Rating (2.3/5)
Should you buy AMZN stock?
- Amazon's revenue growth came in at 22.6% in 2017 Q1.
- Revenue growth has been tremendous with a compounded annual growth of 22.6% over the last 5 years.
- Amazon generates a high return on invested capital of 15.6%.
Should you sell AMZN stock?
- Amazon had a poor average operating margin of 2.9% over the last 4 quarters.
- Amazon posted a TTM Net margin of 1.8%.
- Trading at a PE ratio of 182.5, AMZN stock is overvalued in comparison to industry average multiple of 18.9.
- The company is trading at a price to sales multiple of 3.2, which is overvalued in comparison to the Internet Commerce industry average multiple of 0.7.
- The company has negative Free Cash Flows (FCF), with a negative FCF margin of -9.7%.
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.