Is Amazon Fairly Valued?

Amazon (NASDAQ:AMZN) has evolved over the years from an online bookseller to a powerhouse that has the potential the disrupt any business landscape it enters. In recent years, Amazon has become a massive distribution platform and a dominant cloud services provider. This platform has incubated multiple businesses, creating an ecosystem of consumption within and outside the organization. While the stock has witnessed significant upheaval over the last month, we currently have a price estimate of $1,600 per share for Amazon, which is about in line with the current market price.

Our interactive dashboard on Amazon’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.

The history of tech is inundated with evidence of platform-based companies becoming roaring successes, from Microsoft (in the heyday of on-premise operating systems) to Facebook and Google as platforms for discovery and connections, to Amazon as a platform to distribute goods and services. The magnitude of Amazon’s success can also be gauged by the level of competition in its core markets and the company’s response, including:

• Cloud: AWS is the undisputed leader in the cloud space, with Microsoft’s Azure and Google’s cloud services coming in second and third, respectively. AWS has continued to deliver record growth, and despite a relative cooldown in its growth (+46% y-o-y), the cloud opportunity remains massive.
• E-Commerce: Amazon is already a leader in most of its major markets, and is willing to continue investing for growth in markets where it has yet to achieve a leadership position.
• Others: Newer businesses (such as Alexa, fashion and healthcare) also continue to benefit from the massive scale that Amazon’s reach and ecosystem provide.

Despite Amazon’s massive success, the last decade has seen broader economic growth propelled by cheap central bank money. It will be interesting to see how Amazon’s platform-oriented business is able to grow in an environment laced with geopolitical tensions and tightening monetary policies.

Do not agree with our forecast? Create your own price forecast for Amazon by changing the base inputs (blue dots) on our interactive dashboard.