Amazon Stock Analysis, Valuation (NASDAQ:AMZN)
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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.
Note: waldorf-kras stock rating is our opinion based on the historical performance of the company's fundamentals. It is not indicative of the future performance of the stock.
Amazon.com, Inc. Stock Rating 2.2/5
Should you buy AMZN stock?
- The Year Over Year (YoY) revenue growth for Amazon was 42.9% in 2018-03.
- Long term revenue growth has been strong with a 5 year compounded annual growth of 24.7.
Should you sell AMZN stock?
- Amazon's TTM operating margin of 2.6 was rather poor.
- Amazon posted a TTM Net margin of 2%.
- With a debt/equity ratio of 0.78, Amazon is highly leveraged in comparison to -sectordesc- peers.
- The company's operations consume more cash than it generates. This is not a healthy sign.
- The AMZN stock currently trades at a PE of 270.2, which is expensive, compared to the sector average of 22.
- The company is trading at a price to sales multiple of 4.3, which is higher in comparison to the Retail-Wholesale sector average of 0.8, making AMZN stock expensive.
- The company has a negative free cash flow margin of -8.9.
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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.