Amazon AMZN
What does Amazon do?
Amazon operates one of the world's largest online marketplaces and sells consumer goods both through its own retail operations and through third-party sellers who offer their products on the platform. It also operates physical stores, the Prime subscription program, advertising services and its own devices such as Kindle, Fire tablets, Echo and Ring. In addition, the company produces and distributes media content and offers authors, musicians and developers platforms for publishing.
Reporting is in three segments: North America, International and Amazon Web Services (AWS). AWS provides computing power, storage, databases, analytics and AI services as cloud infrastructure and is regarded as the market leader in this area, competing with Microsoft and Google, among others. In retail, Amazon competes with brick-and-mortar and digital retailers as well as regional platforms. Competitive advantages stem from its size, logistics infrastructure, customer loyalty through Prime and economies of scale in the cloud business.
Score profile
Rank vs. Internet Retail (10 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Amazon ranks above average in the group Internet Retail (6.8/10). On growth, the company ranks in the middle in the group Internet Retail (4.1/10). On valuation (higher = cheaper), the stock ranks below average in the group Internet Retail (3.7/10). On financial strength, Amazon ranks below average in the group Internet Retail (2.8/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 24.8x | 16.6x | better than 25 % |
| Trailing P/E | 21.9x | 29.7x | better than 94 % |
| PEG ratio | 1.2x | 1.0x | better than 35 % |
| EV/EBITDA | 16.8x | 18.4x | better than 61 % |
| Price/sales | 3.7x | 2.7x | better than 25 % |
| Price/book | 4.8x | 6.1x | better than 72 % |
| Revenue growth | 12.1% | 11.5% | better than 55 % |
| Earnings growth | -3.1% | 7.7% | better than 28 % |
| Gross margin | 51.4% | 49.5% | better than 55 % |
| Operating margin | 13.9% | 10.4% | better than 65 % |
| Net margin | 16.9% | 6.9% | better than 75 % |
| Return on equity | 27.4% | 14.9% | better than 75 % |
| Debt/equity | 49.7% | 31.2% | better than 35 % |
| Current ratio | 1.0x | 1.4x | better than 35 % |
| Free cash flow yield | -1.2% | 4.0% | better than 15 % |
| Dividend yield | 0.0% | 1.0% | – |
| Payout ratio | 0.0% | 26.0% | – |
| Beta | 1.50 | 1.30 | – |
Valuation: what is Amazon worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Amazon a model range of 180.58 USD to 298.06 USD per share.
59 analysts, average rating “Strong buy”, average price target 326.99 USD (+20.7%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Retail depends on consumer spending, customer loyalty through Prime and the efficiency of the logistics network.
- The AWS cloud business grows with corporate demand for computing power, data storage and AI applications.
- Advertising and third-party seller services increase earnings per customer and contribute disproportionately to profitability.
Risks
- Antitrust and regulatory proceedings concerning market power and treatment of third-party sellers could restrict business practices.
- The cloud market is fiercely contested, and high investment in data centers and AI infrastructure weighs on cash flow.
- Economic weakness, wage costs and logistics expenses put pressure on margins in the retail business.
What to look for with Amazon
Operating margin by segment is particularly informative, as the high-margin cloud and advertising businesses differ markedly from the low-margin retail business.