Inc (AMZN) DCF Valuation: Is The Stock Undervalued?

Johnny HopkinsStock Screener1 Comment

As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Inc (AMZN).


Amazon is a leading online retailer and one of the highest-grossing e-commerce aggregators, with $386 billion in net sales and approximately $578 billion in estimated physical/digital online gross merchandise volume in 2021. Retail-related revenue represents approximately 80% of the total, followed by Amazon Web Services’ cloud computing, storage, database, and other offerings (10%-15%), advertising services (5%), and other. International segments constitute 25%-30% of Amazon’s non-AWS sales, led by Germany, the United Kingdom, and Japan.

Recent Performance

Over the past twelve months the share price is up 66.26%.AMZN Chart

AMZN data by YCharts


  • Discount Rate: 9%
  • Terminal Growth Rate: 2%
  • WACC: 9%

Forecasted Free Cash Flows (FCFs)

Year FCF (billions) PV(billions)
2024 18.81 17.26
2025 22.59 19.01
2026 27.14 20.96
2027 32.61 23.10
2028 39.18 25.46

Terminal Value

Terminal Value = FCF * (1 + g) / (r – g) = 570.91 billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 371.05 billion

Present Value of Free Cash Flows

Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 105.79 billion

Enterprise Value

Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 476.84 billion

Net Debt

Net Debt = Total Debt – Total Cash = -15.08 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 491.92 billion

Per-Share DCF Value

Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $47.39


DCF Value Current Price Margin of Safety
$47.39 $176.59 -272.62%

Based on the DCF valuation, the stock is overvalued. The DCF value of $47.39 per share is lower than the current market price of $176.59. The Margin of Safety is -272.62%.

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One Comment on “ Inc (AMZN) DCF Valuation: Is The Stock Undervalued?”

  1. Flawed analysis, imo. Should use normalized cap ex or use a higher terminal growth rate – won’t be both (elevated cap ex and 2% growth).

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