What Is Amazon’s Fundamental Value Based On Expected 2018 Results?

by Trefis Team
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Amazon (NASDAQ:AMZN) continued its growth spree in the fourth quarter of 2017, with impressive results across segments. Amazon reported a 31% increase in net revenue through the year to $178 billion. Based on a solid end to the year and positive outlook for 2018, we have revised our revenue and EBITDA expectations for the year. We have summarized our forecasts in an interactive model. You can modify assumptions such as changes in expected revenue or EBITDA margins to see how they impact the company’s value. The image below shows one of the key steps in identifying Amazon’s valuation sensitivity to changes in its segment revenues. We detail how changes in revenue or segment EBITDA margin impacts total EBITDA, which then impacts enterprise value (assuming a constant EBITDA multiple).

We have revised our long-term price estimate for Amazon to $1,150 from just over $1,000 previously. Our new price estimate is still around 15% below the current market price. The upward revision was driven by higher revenues, as well as a slight improvement in margins relative to our prior expectations. The company has given positive revenue guidance for Q1, with net revenue expected to rise 34-42% over the comparable prior year period to around $49 billion. Along with revenue and margin forecasts, we have updated along with updated figures for cash, debt, share count and discount rate.

Amazon’s stock price has surged from $750 at the beginning of last year to around $1,100 by the end of 2017. Since then it has steadily climbed up to over $1,400 currently, increasing by over 25% from the beginning of the year. All our forecasts for the year are summarized our dashboards for Amazon. If you have a different view, you can modify various inputs to see how updated inputs impact the company’s valuation.

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