Can Profitability In North America Offset International Weakness For Amazon?

Amazon (NASDAQ:AMZN) saw strong y-o-y revenue growth in its fourth quarter, and also expanded its margins in North America, which resulted in strong cash flows. The company’s Q4 TTM free cash flow of $19.4 billion was up +134% y-o-y.

We note that while AWS has always been a cash cow, despite the issues in India, the company’ cash flow reliance on AWS is likely to continue to decline. Given the sustained momentum in the business, we have revised our price estimate upwards to about $2,050 per share. Our price estimate is about 25% ahead of 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, and see all of our Information Technology company data here.

Absent the exposure to China (the company largely exited China in 2017) and India (we have reduced our NPV by ~$21 billion to account for the total value of Amazon India), Amazon is a clear growth story. On one hand the company’s North American business continues to show strength, and on the other hand AWS is the market leader in cloud. Especially for the North American business, we note that Q4 was a holiday quarter which led to some margin headwinds due to promotional shipping offers. Moving forward, we expect Amazon’s efficiencies and lack of Q4 margin pressure to boost the cash flows further.

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