Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Amazon.com, Inc. (AMZN).
Profile
Amazon.com is one of the world’s largest technology and retail platforms, operating through its North America, International, and AWS segments. The company dominates global e-commerce, cloud computing, and digital advertising, while expanding into AI infrastructure and subscription ecosystems like Prime Video and Music.
AWS remains the primary profit engine, generating high-margin recurring revenue, while advertising and logistics efficiencies continue to expand overall profitability. With more than $670 billion in annual revenue, a cash balance exceeding $100 billion, and improving free cash flow, Amazon’s scale and integration give it a durable competitive moat across multiple industries.
DCF Analysis
Inputs:
Discount Rate: 10%
Terminal Growth Rate: 3%
WACC: 10%
Forecasted Free Cash Flows (in billions USD)
2025: $25.0 → PV: $22.7
2026: $35.0 → PV: $28.9
2027: $45.0 → PV: $33.8
2028: $55.0 → PV: $37.6
2029: $65.0 → PV: $41.1
Total Present Value of FCFs = $164.1B
Terminal Value Calculation
Using perpetuity growth model with 2029 FCF = $65B:
TV = (65 × 1.03) ÷ (0.10 − 0.03) = $957.1B
Present Value of Terminal Value = $622.5B
Enterprise Value
Enterprise Value = 164.1B + 622.5B = $786.6B
Net Debt
Cash & Equivalents: $101.2B
Total Debt: $130.9B
Net Debt = $29.7B
Equity Value & Per-Share Value
Equity Value = 786.6B − 29.7B = $756.9B
Shares Outstanding: ~10.6B
Intrinsic Value per Share ≈ $71
Conclusion
DCF Value: $71
Current Price: ~$249
Margin of Safety: –72%
Amazon remains a dominant global platform with powerful network effects across e-commerce, cloud, and AI. AWS continues to underpin profitability, while cost discipline and advertising growth are improving margins. However, under conservative assumptions, AMZN trades well above intrinsic value — suggesting the market is already pricing in robust growth and expanding profitability over the coming decade. For long-term investors, Amazon offers world-class quality but limited near-term margin of safety.
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