Amazon’s stock (NASDAQ: AMZN) has gained approximately 53% YTD as compared to a 17% rise in the S&P500 index over the same period. However, at its current price of $129, the stock is trading 11% below its fair value of $144 – Trefis’ estimate for Amazon’s valuation. The company outperformed the street expectations in the second quarter of 2023, with revenues increasing 11% y-o-y to $134.4 billion. It posted strong growth in each of three segments – North America (11%), International (10%), and Amazon web services (12%). On the cost front, the operating expenses as a % of revenues decreased from around 97% to 94%. Further, the other income jumped from -$5.55 billion to $61 million in the quarter. Notably the other income mainly benefited from a pre-tax valuation gain from the common stock investment in Rivian Automotive. Overall, the net income improved from -$2.03 billion to $6.75 billion.
The company’s top line grew 10% y-o-y to $261.74 billion in the first half of FY2023. It was driven by an 11% increase in North America, a 5% rise in the International unit, and a 14% jump in the Amazon web services (AWS) division. Further, the profitability numbers improved in the first half of 2023 due to lower operating expenses as a % of revenues and a significant drop in the total non-operating expense from $14.9 billion to $773 million. Altogether, the firm reported a net income of $9.92 billion vs. a net loss of $5.87 billion in the year-ago period.
Moving forward, AMZN expects the revenues to remain between $138 billion to $143 billion in Q3 2023. Overall, we forecast Amazon’s revenues to touch $558.35 billion in FY2023. Additionally, the adjusted net income margin is likely to improve in the year, resulting in a net income of around $15.82 billion and revenue-per-share (RPS) of $55.22. This coupled with a P/S multiple of 2.6x will lead to a valuation of $144.
What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.
|S&P 500 Return||-2%||17%||101%|
|Trefis Multi-Strategy Portfolio||-3%||25%||302%|
 Month-to-date and year-to-date as of 8/4/2023
 Cumulative total returns since the end of 2016