Amazon.com (AMZN) Could Be 47% Below Fair Value On Its Generac Data Center Deal

Amazon.com (AMZN) just signed a long-term agreement with Generac Holdings to supply backup generators for its global data centers, with initial deliveries of about US$2.4b planned for 2027 and 2028.

Amazon.com shares have been choppy in recent weeks, with the 30-day share price return down 3.18% even as the stock is up 10.90% year to date and the 3-year total shareholder return sits near 94%. Recent headlines around heavier AI data center spending, new fixed income offerings and new wage commitments help explain why investors are recalibrating both growth potential and perceived risk as deals like the Generac generator agreement lock in future capacity needs.

Compare Amazon.com’s AI buildout story with other potential beneficiaries of the same theme by scanning our curated list of 89 AI infrastructure stocks before you move on.

Recent swings in Amazon.com look less like a verdict on its AI buildout and more like a tug-of-war between solid operating momentum on one side and fresh worries about debt, wages and data center risk on the other. How does that mix show up in today’s valuation?

Most Popular Narrative: 47% Undervalued

Amazon.com last closed at $251.19, while the most followed valuation storyline on Simply Wall St pegs fair value at about $475.09 per share, which frames the recent pullback as a gap between price and what that narrative considers the intrinsic worth of the business.

Amazon is a company of two sides, a high tech, high margin side comprising its AWS, Advertising and subscription services segments, and its more traditionally known low margin, high volume stores and third-party seller segments. These two sides form a cohesive whole. The Amazon online store motivates customers to purchase subscriptions and hosts its advertising. AWS underpins the functioning of the online store, but is also easy to integrate with for Amazon's many third-party sellers, encouraging adoption. However, the different sides have different growth prospects. The high margin side is expected to experience high (15%+ annual) growth while maintaining its relatively high profit margin (~30-40%), which this narrative suggests could lead to strong profit expansion for Amazon as a whole. Whereas the low margin, high volume side of Amazon is expected to grow at a fairly steady pace (5-10% annually) and continue to be limited by its low profit margin (<5%). Despite that, this narrative argues that Amazon's business mix could result in overall yearly revenue gains of ~9% and net profit margins of ~15%, implying potential revenues of ~$1T and earnings of ~$150B in 5 years.

See why 245 investors see Amazon.com as 47% undervalued.

Result: Fair Value of $475.09 (UNDERVALUED)

Still, the Amazon.com investment story could fray if AI infrastructure spending compresses returns on capital, or if heavier debt and wage commitments squeeze future cash flows.

Find out about the key risks to this Amazon.com narrative.

Another View On Amazon.com’s Valuation

That 47% undervaluation story leans heavily on long term cash flow potential. A simpler check looks at today’s P/E of 20x, which sits above the global Multiline Retail average of 18.6x, yet below a peer average of 30.1x and a fair ratio of 33.4x. Is Amazon.com priced for comfort or for future improvement?

For a closer look at how that fair ratio could matter if sentiment shifts quickly, take a look at the See what the numbers say about this price — find out in our valuation breakdown..

Next Steps

Mixed mood on Amazon.com so far. If you want to move quickly and build your own view from the ground up, weigh both sides by checking 4 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Amazon.com?

If you stop with Amazon.com, you only see one angle. Broaden your watchlist now and give yourself more ways to react when the market shifts.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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