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Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick:Amazon.com, Inc. (AMZN).
 

Profile

Amazon is the global leader in e-commerce and cloud services through its AWS division. While its retail operations run on thin margins, AWS delivers high profitability and remains the backbone of Amazon’s cash generation. The company’s scale, logistics network, Prime ecosystem, and digital advertising initiatives provide durable competitive advantages. With over $2.4 trillion in market cap, Amazon is one of the largest businesses in the world, balancing growth investment with expanding free cash flows.
 

DCF Analysis

Inputs

• Discount Rate: 10%
• Terminal Growth Rate: 3%
• WACC: 10%

Forecasted Free Cash Flows (in billions)

2025: $45.0 → PV: $40.91
2026: $52.0 → PV: $43.03
2027: $58.0 → PV: $43.56
2028: $65.0 → PV: $44.37
2029: $72.0 → PV: $44.73

Total Present Value of FCFs: $216.60B

Terminal Value Calculation

Using the perpetuity growth model:

TV = (72 × 1.03) / (0.10 – 0.03) = $1,059.43B

Present Value of Terminal Value = $658.00B

Enterprise Value

Enterprise Value = $216.60B + $658.00B = $874.60B

Net Debt

• Cash: $84.0B
• Total Debt: $164.0B
• Net Debt: –$80.0B

Equity Value & Per-Share Value

Equity Value = $874.60B – $80.0B = $794.60B
Shares Outstanding: ~10.4B
Intrinsic Value per Share: $76.40
 

Conclusion

DCF Value: $76.40
Current Price: $228.01
Margin of Safety: –66%

Amazon remains a dominant global platform with leading positions in e-commerce, cloud computing, and digital advertising. However, our conservative DCF suggests the current stock price already prices in significant long-term growth and margin expansion. For value-focused investors, today’s valuation leaves little room for error, as the stock trades well above its intrinsic value estimate.

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