Dear Reader,
Here I am going to make an attempt to determine the real intrinsic value of Amazon Inc. Corporation.
The market values Amazon at almost 764 billion USD with Price/Earnings of 256 at a price of 1574.37 USD.
Is this market capitalization justified? No! What is the intrinsic value of Amazon Corporation? My estimate is that the real value of Amazon is about 350 billion USD or less than half the current market capitalization.
Why? Amazon simply does not make enough money to justify its current market capitalization. The company made 3.03 billion USD in profit in 2017 on 177.866 billion USD in revenue. Yes. I know revenue grew by more than 30% year on year. But still, if Amazon makes 5 billion USD profit in 2018 which is more than 60% increase year on year it will trade at 150 Price/Earnings multiple if the market capitalization remains near the current.
Yes. I know investors expect Amazon to make money by growing its main business and new verticals in the future. But they have been waiting for more than a decade. Amazon is just too big at the moment to continue to grow so fast and become highly profitable. Unless it makes a technological breakthrough or enters many new markets successfully, which franky are wild assumptions.
Amazon and Tesla have been poster stocks for this market. Yes. They are overvalued. While Tesla's stock could go down to 0, Amazon is actually worth half its current market capitalization, in my opinion.
Disclaimer:
The blogposts and comments on this blog and posts on social
networks(Twitter, LinkedIn etc.) are not investment recommendation,
are provided solely for informational purposes, and do not constitute an
offer or solicitation to buy or sell any securities. The opinions
expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!
Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Kind regards,
Petar Posledovich
Stocks valuations, analysis. Unbiased. Insightful. Property of Wolfteam Ltd., www.wolfteamedge.com If you find the blog useful, LINK TO www.posledovich.blogspot.com Stocks, Bitcoin, Cryptocurrencies, AI, analysis, insights. CLICK ADVERTISEMENTS, SHARE ON SOCIAL NETWORKS! Technology, Bitcoin, AI, company strategy, stocks analysis. Stocks, crypto involve high RISK! Nothing on this blog is meant or should be construed as investment recommendation to buy or sell securities or their derivatives!