DCF Studio

    AMZN · NMS · Consumer Cyclical

    Amazon.com, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 48.38

    Market price

    USD 253.71

    Implied upside

    -80.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 13.2% of revenue against depreciation of 8.5%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 48.38-80.9%
    Exit multiple
    USD 213.51-15.8%
    Market price
    USD 253.71

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 801.0bnUSD 895.0bnUSD 1000.0bnUSD 1117.3bnUSD 1248.4bn+11.7%
    EBITUSD 61.5bnUSD 68.7bnUSD 76.8bnUSD 85.8bnUSD 95.8bn+11.7%
    NOPATUSD 61.5bnUSD 68.7bnUSD 76.8bnUSD 85.8bnUSD 95.8bn+11.7%
    Add depreciation & amortisationUSD 68.2bnUSD 76.2bnUSD 85.2bnUSD 95.2bnUSD 106.3bn+11.7%
    Less capital expenditureUSD -106.0bnUSD -118.5bnUSD -132.4bnUSD -147.9bnUSD -165.3bn+11.7%
    Less increase in working capitalUSD -20.7bnUSD -23.1bnUSD -25.8bnUSD -28.9bnUSD -32.2bn+11.7%
    Free cashflow to firmUSD 3.0bnUSD 3.3bnUSD 3.7bnUSD 4.2bnUSD 4.6bn+11.7%
    Discount factor0.94600.84650.75740.67780.6065-
    Present valueUSD 2.8bnUSD 2.8bnUSD 2.8bnUSD 2.8bnUSD 2.8bn-0.0%
    Present Value Of The ForecastUSD 14.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.297Reported 1.443, pulled toward 1.0 (Blume)
    Cost of equity12.13%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 2736.6bn94.7% of capital
    Total debtUSD 153.0bn5.3% of capital, book value as a proxy
    Tax rate0.0%Effective, capped at statutory
    WACC11.75%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 48.38

    97% of EV

    Forecast FCFF, final year
    USD 4.6bn
    Capex at depreciation, working capital in reinvestment
    USD 95.8bn
    Less reinvestment at g/ROIC (16.2% of NOPAT)
    USD -15.5bn
    Capitalised
    USD 80.3bn
    ROIC (reported)
    15.5%
    Terminal value, undiscounted
    USD 889.9bn
    Terminal value, discounted
    USD 539.7bn
    Enterprise value
    USD 553.8bn
    Less net debt
    USD 30.0bn
    Equity value
    USD 523.9bn

    Exit at 19.0x EBITDA

    Value per shareUSD 213.51

    99% of EV

    Terminal value, undiscounted
    USD 3837.6bn
    Terminal value, discounted
    USD 2327.5bn
    Enterprise value
    USD 2341.6bn
    Less net debt
    USD 30.0bn
    Equity value
    USD 2311.6bn

    Spread between methods: 126%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    9.75%63.2565.2967.5870.1773.16
    10.75%53.9355.2756.7658.4260.28
    11.75%46.5247.4148.3849.4550.62
    12.75%40.5141.1041.7342.4043.14
    13.75%35.5535.9336.3236.7437.19

    Outlined: this model. Green text: above today's price of 253.71. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.7%64.2%+52.5pp
    EBIT margin7.7%28.2%+20.5pp
    Discount rate11.8%4.9%-6.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.