Amazon.com, Inc. (AMZN)
Discount cash flow analysis
5% margin of safety What's this?
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $63.27 | $62.15 | $61.07 | |
| Terminal Growth% | 0 | $63.79 | $62.65 | $61.55 |
| +1% | $64.33 | $63.16 | $62.05 |
How does a change in discount rate or terminal growth affect valuation?
This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate
Valuations and comments
- Valuecruncher created a new valuation of $97.61 (overvalued by 16.85%) - 11 hours ago
- GordonGekko created a new valuation of $94.51 (overvalued by 22.17%) - 14 days ago
- beatallica created a new valuation of $74.74 (overvalued by 41.43%) - 19 days ago
- GordonGekko created a new valuation of $99.04 (overvalued by 24.82%) - 2 months ago
- SethWellbourne created a new valuation of $109.00 (overvalued by 10.39%) - 3 months ago
- GordonGekko created a new valuation of $70.97 (overvalued by 9.0%) - 8 months ago
- SethWellbourne created a new valuation of $53.54 (overvalued by 32.4%) - 9 months ago
- SethWellbourne created a new valuation of $65.61 (overvalued by 8.16%) - 10 months ago
- GordonGekko created a new valuation of $48.71 (overvalued by 5.58%) - 1 year ago
- TheCrunchBlog created a new valuation of $62.65 (overvalued by 10.45%) - 1 year ago
- GordonGekko created a new valuation of $60.34 (overvalued by 25.51%) - 1 year ago
- KiwiEMH created a new valuation of $81.16 (undervalued by 0.48%) - 1 year ago
- GordonGekko created a new valuation of $83.39 (undervalued by 0.34%) - 1 year ago
- GordonGekko created a new valuation of $76.27 (overvalued by 4.88%) - 1 year ago
- sethc created a new valuation of $58.29 (overvalued by 24.6%) - 1 year ago
- virtualmark created a new valuation of $44.07 (overvalued by 40.87%) - 1 year ago
- TheCrunchBlog created a new valuation of $59.00 (overvalued by 19.54%) - 1 year ago
- KiwiEMH created a new valuation of $78.46 (overvalued by 0.33%) - 1 year ago
- KiwiEMH created a new valuation of $79.54 (overvalued by 1.2%) - 1 year ago
- Sam created a new valuation of $58.11 (overvalued by 27.53%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 48,168 |
| Net Debt (Long-term borrowings less cash): | -1,830 |
| Equity Value: | 29,797 |
| Number of Shares Outstanding: | 425,000,000 |
| Calculated value per share: | $62.65 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
Where:
- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate
To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.
Where:
- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate
The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.
Where:
- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium
Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/09/running-the-numbers-amazon-amzn-still-looks-expensive/
Our assumptions are revenues of US$19.5 billion in 2008 growing to US$30.5 billion in 2010. We have used an EBITDA margin of 7% in 2008 increasing to 8% in 2010. We used a terminal growth rate of 5%. We used a terminal capital expenditure number of US$375 million. We have used a WACC (discount rate) of 10.5%. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.
Our analysis incorporates the cash and debt on the $AMZN balance sheet – Valuecruncher calculates a net debt number.
Based on our analysis the current share price looks expensive. We recognise that $AMZN has a range of potentially valuable growth options (especially their Web Services platform). Currently it is very difficult to determine a value of these growth options – we have made a broad attempt with our growth projections and terminal growth rate. However, it appears that these options are being valued into the current share price at a level beyond what we are projecting.