What Does Amazon.com, Inc.'s (NASDAQ:AMZN) Share Price Indicate?

By
Simply Wall St
Published
December 14, 2020
NasdaqGS:AMZN

Amazon.com, Inc. (NASDAQ:AMZN) saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$3,444 and falling to the lows of US$2,955. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Amazon.com's current trading price of US$3,116 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Amazon.com’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Amazon.com

Is Amazon.com still cheap?

According to my valuation model, Amazon.com seems to be fairly priced at around 7.7% below my intrinsic value, which means if you buy Amazon.com today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $3376.04, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Amazon.com’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Amazon.com look like?

earnings-and-revenue-growth
NasdaqGS:AMZN Earnings and Revenue Growth December 14th 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Amazon.com. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? AMZN’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on AMZN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Amazon.com as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Amazon.com you should know about.

If you are no longer interested in Amazon.com, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. 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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