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Amazon.com, Inc. (AMZN) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Amazon.com, Inc. (AMZN)

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Intrinsic Value (DCF)

Current$242.60
→
Intrinsic$149.00
-39%
$91.27$149.00$288.34
AMZN's FCF is temporarily suppressed due to reinvestment (actual margin: 1.5%). Valuation uses normalized cash flow (8% target margin) to reflect long-term earnings power.
Current price reflects expectations beyond normalized FCF — likely anticipating margin expansion, capital returns, or segment dominance.
Range: Bear $91 → Bull $288. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →21%23%25%27%
6%$219$237$257$277
8%$127$138$149$161
10%$88$95$103$111
12%$66$71$77$83

Bull Case

  • Bull case ($288) offers 19% upside at 30% growth, 7% discount

Bear Case

  • Bear case ($91) implies 62% downside at 20% growth, 10% discount
  • Trading 39% above base case — execution must exceed assumptions to justify
  • Using 25% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$41.10B
Year 2$51.37B
Year 3$64.21B
Year 4$80.27B
Year 5$100.34B
Terminal$2.05T

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate8.1%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$32.88BNormalized (8% margin)
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
⚡ Reinvestor Mode: FCF margin is 1.5% (below 5% threshold). Using Revenue × 8% to reflect long-term earnings power.
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Uses normalized FCF (Revenue × 8%) due to reinvestment-suppressed margins. See FAQ below for full methodology.

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Frequently Asked Questions

Is AMZN stock undervalued or overvalued?
🔴 OVERVALUED

AMZN trades at $242.60 vs. our DCF-derived intrinsic value of $149.81, implying -38% downside. Using a 8.1% WACC and 25.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($240.78) suggests limited upside.

What is AMZN's intrinsic value?

Using a 5-year DCF model: Base FCF of $32.88B, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 8.1% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $52.12B net debt and dividing by 10.72B shares: Bear $94.46 | Base $149.81 | Bull $240.78. Current price $242.60 implies -38% to base case.

How is AMZN's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap). Note: FCF is normalized to 8% of revenue due to reinvestment-suppressed margins.

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=8.1%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($1658.24B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 50.4x.

⚡ Reinvestor Mode: AMZN's FCF margin (1.5%) is below 5% due to heavy reinvestment. We use normalized FCF (Revenue × 8% target margin) to reflect long-term earnings power rather than temporarily suppressed cash flows.