Amazon’s stock (NASDAQ: AMZN) has lost approximately 51% in 2022 as compared to the 25% drop in the S&P500 index over the same period. However, at its current price of $85, the stock is trading 39% below its fair value of $139 – Trefis’ estimate for Amazon’s valuation. While the company’s top line improved 15% y-o-y in the third quarter, its total expenses as a % of revenues increased as well, leading to a 9% decline in net income to $2.9 billion. Further, despite positive growth, the revenues were below the street expectations. The lower-than-expected growth was due to tough macroeconomic conditions and a drop in online retail sales.
In a recent development, the company has secured a term loan of $8 billion provided by DBS Bank, Mizuho Bank, the Bank of China, and other lenders. It intends to use this to support capital expenditures, debt repayments, acquisitions, and working capital needs. Further, the firm plans to reduce around eighteen thousand roles, much more than the initially expected numbers. Notably, it communicated to eliminate around ten thousand roles in November 2022. While the numbers are significantly higher than the historical levels, it is also to be noted that AMZN boosted its workforce by more than 75% during the pandemic to manage the high demand.
The company’s net sales were $364.8 billion in the first nine months of 2022 – up 10% y-o-y. It was mainly driven by AWS, advertising services, physical stores, and third-party seller services. We expect the same trend to continue in Q4. Overall, we estimate Amazon’s revenues to touch $511.5 billion in FY2022. Additionally, the profitability numbers suffered over the first three quarters – adjusted net income declined from $19 billion to -$3 billion. The drop was primarily because of higher operating expenses and a jump in other expenses (net). We expect the company to post revenue per share (RPS) of $50.09 in the full year FY2023. This coupled with a P/S multiple of just below 3x will lead to a valuation of $139.
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 Month-to-date and year-to-date as of 1/5/2023
 Cumulative total returns since the end of 2016