Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: A quality valuation analysis on $AMZN 🧘🏽‍♂️

•NTM P/OCF Ratio: 15.62x
•5-Year Mean: 22.10x

•NTM FCF Yield: 1.07%
•5-Year Mean: 2.63%

As you can see, $AMZN appears to be slightly undervalued using P/OCF

Going forward, investors can expect to receive ~41% MORE in operating cash flow & ~59% LESS in FCF per share🧠***

Before we get into valuation, let’s take a look at why $AMZN is a quality business

BALANCE SHEET✅
•Cash & Equivalents: $93.18B
•Long-Term Debt: $57.92B

$AMZN has an excellent balance sheet, an AA S&P Credit Rating & 54x FFO Interest Coverage Ratio

RETURN ON CAPITAL🆗 / ✅
•2020: 11.6%
•2021: 8.9%
•2022: 4.2%
•2023: 10.1%
•2024: 15.5%

RETURN ON EQUITY✅
•2020: 27.4%
•2021: 28.8%
•2022: (1.9%)
•2023: 17.5%
•2024: 24.3%

$AMZN has good return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2019: $280.52B
•2024: $637.96B
•CAGR: 17.85%

FREE CASH FLOW🆗(✅)
•2019: $21.65B
•2024: $32.88B
•CAGR: 8.71%

NORMALIZED EPS✅
•2019: $1.15
•2024: $5.53
•CAGR: 36.90%

SHARE BUYBACKS❌
•2019 Shares Outstanding: 10.08B
•LTM Shares Outstanding: 10.78B

MARGINS🆗➡️✅
•LTM Gross Margins: 49.6%
•LTM Operating Margins: 11.4%
•LTM Net Income Margins: 10.5%

*Important for $AMZN to continue expanding margins & increase profitability

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~41% MORE in OCF & ~59% LESS in FCF per share

We’re using P/OCF instead of P/E as historical data reveals a stronger correlation between AMZN's share price and Operating Cash Flow (OCF)

Today, analysts anticipate aggressive OCF (per share) growth between 2025 - 2027:

2025E: $13.11 (21% YoY) *FY Dec
2026E: $16.21 (24% YoY)
2027E: $19.90 (23% YoY)

$AMZN has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $AMZN ends 2027 with $19.90 in OCF per share & see its CAGR potential assuming different multiples (photos attached below also include these CAGR estimates):

18x P/OCF: $358.13💵 … ~21% CAGR

17x P/OCF: $338.24💵 … ~18% CAGR

16x P/OCF: $318.34💵 … ~15% CAGR

15x P/OCF: $298.45💵 … ~12% CAGR

As you can see, $AMZN appears to have strong double-digit CAGR potential if we assume ~16x P/OCF, a multiple less than what it’s trading for today & a multiple that’s justified given its growth rate

Also by assuming a bit of multiple compression, we leave ourselves with some margin of safety

AWS & Amazon Ads will continue to drive growth & profitability. In $AMZN LTM:

☁️AWS revenue: $116.38B
📈Ads revenue: $61.23B

Combined, these segments generated $177.61B net revenue … with ~37% Operating Income Margin

Today at $229💵 $AMZN appears to be a good to fair consideration for investment

#stocks #investing

Data: TIKR
Graphs: FAST Graphs
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

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The All-In Podcast
🚨Should the US create a Sovereign Wealth Fund? Chamath and Friedberg discuss

Chamath:

“I think that we should start a sovereign wealth fund right now.”

“The great news is that these Trump tariff deals come with huge amounts of capital that these other countries have committed to spending inside the United States.”

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Friedberg:

“The concern I have is anytime we create a new income stream at the federal government, or we have some sort of growing asset that you mark up on the book, someone tends to invest ahead of the curve on that.”

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