Should Investors Rethink Amazon After AR Glasses Reveal and 25% Share Surge?

Trying to figure out if now’s the right moment to buy, sell, or just sit tight with Amazon.com stock? You’re hardly alone. Amazon continues to draw the attention of investors, and with good reason. Over the past year, shares have popped by 24.8%. Looking farther back, a 79.2% gain in the last three years showcases the kind of long-term performance that keeps Amazon in the spotlight. More recent moves, including a 1.9% lift just in the last week, make it tough to ignore for those watching momentum.

What’s driving these shifts? Some of the latest buzz is tied to Amazon’s push to stay at the cutting edge, whether it’s quietly working on a potential AR glasses competitor to Meta or strategically taking a stake in Colombian delivery firm Rappi to boost its logistics edge in Latin America. There are also some legal clouds, like those surrounding its ties to Anthropic, although short-term bumps haven’t dulled the underlying growth narrative.

If you’re hunting for value, Amazon’s current Value Score lands at 3 out of 6. This means the company is undervalued on three of six key checks, which suggests it is hardly a steal, but not exactly overpriced either. So, what do those valuation checks actually tell us, and how much should they matter in your decision-making? Let’s break down the most popular valuation approaches, and a little later, I’ll share the method I consider the most insightful for understanding Amazon’s true worth.

Why Amazon.com is lagging behind its peers

Approach 1: Amazon.com Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s true worth by projecting its future cash flows and then discounting those back to today’s dollars. This gives investors a sense of what the business is really worth based on the cash it can generate.

For Amazon.com, the analysis starts with its latest twelve months free cash flow at $37.6 Billion. Analyst forecasts see this number climbing impressively, projecting over $138.5 Billion in free cash flow by 2029. While analysts supply estimates for about five years, longer-range projections rely on extrapolation. These still point to substantial growth ahead for the business.

After crunching these numbers, the DCF model calculates an intrinsic fair value of $274.26 per share. Based on this model, Amazon’s shares currently trade at roughly a 16.0% discount to their calculated worth, suggesting the stock is undervalued according to its long-term cash-generating potential.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Amazon.com.

Our Discounted Cash Flow (DCF) analysis suggests Amazon.com is undervalued by 16.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Amazon.com Price vs Earnings

The Price-to-Earnings (PE) ratio is a commonly used valuation metric for companies that are consistently profitable, like Amazon.com. It captures how much investors are willing to pay for each dollar of current earnings, making it a reliable snapshot for companies with solid and growing profits.

Growth expectations play a major role in determining what is considered a “normal” or “fair” PE ratio. If investors expect higher earnings growth or see less risk, they are typically willing to pay a higher multiple. In contrast, riskier or slower-growing businesses tend to trade at lower PE ratios.

Amazon.com’s current PE ratio is 34.8x. This is noticeably higher than the Multiline Retail industry average of 22.6x, yet below the peer group average of 45.5x. This suggests that investors are factoring in Amazon’s significant growth but are not valuing it as highly as some other leading names.

Simply Wall St produces a Fair Ratio for each company. In Amazon’s case, it is 41.1x. This proprietary benchmark considers more than just peer or industry averages, weighing factors such as earnings growth, profit margins, company size, and specific risks. By taking these elements into account, the Fair Ratio provides a more tailored benchmark than generic sector comparisons.

Since Amazon’s actual PE of 34.8x is below its Fair Ratio of 41.1x, shares appear undervalued from this perspective.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Amazon.com Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. Narratives are a smarter investment tool that let you create a story—your informed perspective—about a company’s future, connecting your expectations for Amazon.com’s revenue, margins, and fair value into one clear forecast.

Unlike rigid formulas, a Narrative bridges the company’s story with financial forecasts and then arrives at an evidence-backed fair value. Narratives on Simply Wall St’s Community page make this process intuitive and impactful. Millions of investors use them to capture their view, compare it with others, and see if the current price leaves room for return.

Each Narrative shows how personal assumptions about growth, margins, and risks translate to a fair value, and updates dynamically as new results, news, or sector trends emerge. By comparing that fair value to the live price, you can instantly decide if it’s time to buy, sell, or hold based on your own rationale, not just consensus.

For Amazon.com, different investors see the data in very different ways; some believe Amazon is worth as much as $434 per share given its AI growth potential, while others think a fair value is closer to $151 due to retail headwinds. Your future returns all depend on the Narrative that fits your outlook best.

For Amazon.com, we'll make it really easy for you with previews of two leading Amazon.com Narratives:

• 🐂 Amazon.com Bull Case

  Fair Value: $234.75

  Current Price Discount: ((234.75-230.33)/234.75) = 1.88%

  Forecast Revenue Growth Rate: 13.6%

  • Sees the recent stock price drop as a long-term buying opportunity, emphasizing Amazon’s dominant e-commerce, expanding AWS services, and untapped potential in advertising and AI infrastructure.
  • Highlights robust year-over-year growth in key metrics, with positive outlook from new partnerships, pipeline projects, and increased capital investment supporting future earnings.
  • Projects a 10-year upside scenario of $674 per share, targeting $235 to $250 as attractive buy prices, and expects growth to outpace current conservative estimates as future innovations deliver results.
• 🐻 Amazon.com Bear Case

  Fair Value: $222.55

  Current Price Premium: ((230.33-222.55)/222.55) = 3.49%

  Forecast Revenue Growth Rate: 15.19%

  • Argues that while Amazon’s core businesses (AWS, advertising, ecommerce) are strong, heavy reinvestment will suppress short-to-medium term free cash flow and mask true profitability.
  • Warns that certain revenue streams, such as third-party sellers and advertising, may not maintain historical growth rates as competition intensifies, and ongoing regulatory risks remain.
  • Views Amazon as fairly valued today but notes upside is limited at current prices with the market pricing in optimistic growth assumptions. Prefers to remain cautious until new profit drivers fully materialize.

Do you think there's more to the story for Amazon.com? Create your own Narrative to let the Community know!

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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