Is Amazon Stock Cheap Compared With Its History?

During their recent episode of the Acquirers Podcast, Travis and Carlisle discussed Is Amazon Stock Cheap Compared With Its History? Here’s an excerpt from the episode:

So it’s a simple matter, just directing it to the Walmart site. Amazon currently trading at EV EBIT of 22 times, which is as low as it’s been in 25 years. So that’s one of the metrics that I like to track, just because it takes out that impact of the free cash flow spending on the CapEx.

It sort of normalises for all of that sort of stuff. You have to assume that all of those executives in there are pretty smart guys, and they’ll figure it out eventually. But what that indicates is in the short term, Amazon might be a pretty good opportunity.

What do you think about that?

[Tim] Oh, I mean, I agree. As you know, Toby, on the site, we’ve done trades on Amazon, we’ve done trades on Meta, we’ve done trades on Microsoft, and we’ve done trades on Google. And as of this recording, they’ve all been successful thus far.

And what’s interesting is they’ve had different glide paths. So since we started a couple of months ago, Facebook, I mean, Meta just recently has had this huge run. I mean, they’ve had their huge run like really the last couple of weeks.

But Amazon’s actually down a little bit from when we started. But selling puts has been successful. And there was even one trade where we sold a put at $250.

We got exercised. I think the stock was at like $246-ish at expiration. So we collected a premium when we sold the put initially, got exercised.

And then we sold a call at $260. And so we ended up owning the stock at a break even of like $246, $247. And then we were able to ride the stock up to $260.

And now it’s below again. So there actually today, there was a trade recommended suggestion on Amazon, selling a put at a lower price. So absolutely, Toby.

I think that’s one of the benefits of the options element is that I don’t know that with, I don’t know with extreme confidence that you or I would say we know which AI model is going to win, right? But I think we both believe in the business models of an Amazon and a Meta. And when you can buy them at valuations that are far more attractive than historical averages.

Value Options Letter combines value investing with conservative Buffett-style options strategies. Follow the strategy from cash-secured puts through assignment and covered calls, with ongoing trade recommendations focused on businesses they believe are worth owning.

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