Intrinsic value of Amazon.com - AMZN

Previous Close

$1,294.58

  Intrinsic Value

$956.41

stock screener

  Rating & Target

sell

-26%

Previous close

$1,294.58

 
Intrinsic value

$956.41

 
Up/down potential

-26%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AMZN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  27.08
  33.70
  30.83
  28.25
  25.92
  23.83
  21.95
  20.25
  18.73
  17.35
  16.12
  15.01
  14.01
  13.11
  12.30
  11.57
  10.91
  10.32
  9.79
  9.31
  8.88
  8.49
  8.14
  7.83
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
Revenue, $m
  135,987
  181,815
  237,868
  305,059
  384,137
  475,677
  580,074
  697,553
  828,184
  971,911
  1,128,573
  1,297,939
  1,479,733
  1,673,662
  1,879,442
  2,096,811
  2,325,554
  2,565,508
  2,816,578
  3,078,737
  3,352,035
  3,636,597
  3,932,628
  4,240,407
  4,560,289
  4,892,702
  5,238,145
  5,597,185
  5,970,455
  6,358,655
  6,762,544
Variable operating expenses, $m
 
  169,506
  221,647
  284,149
  357,709
  442,861
  539,973
  649,254
  770,770
  904,467
  1,050,196
  1,207,365
  1,376,473
  1,556,870
  1,748,289
  1,950,490
  2,163,271
  2,386,480
  2,620,030
  2,863,895
  3,118,121
  3,382,826
  3,658,199
  3,944,500
  4,242,060
  4,551,277
  4,872,614
  5,206,599
  5,553,821
  5,914,931
  6,290,636
Fixed operating expenses, $m
 
  5,230
  5,360
  5,494
  5,632
  5,772
  5,917
  6,065
  6,216
  6,372
  6,531
  6,694
  6,862
  7,033
  7,209
  7,389
  7,574
  7,763
  7,957
  8,156
  8,360
  8,569
  8,783
  9,003
  9,228
  9,459
  9,695
  9,938
  10,186
  10,441
  10,702
Total operating expenses, $m
  131,801
  174,736
  227,007
  289,643
  363,341
  448,633
  545,890
  655,319
  776,986
  910,839
  1,056,727
  1,214,059
  1,383,335
  1,563,903
  1,755,498
  1,957,879
  2,170,845
  2,394,243
  2,627,987
  2,872,051
  3,126,481
  3,391,395
  3,666,982
  3,953,503
  4,251,288
  4,560,736
  4,882,309
  5,216,537
  5,564,007
  5,925,372
  6,301,338
Operating income, $m
  4,186
  7,080
  10,860
  15,415
  20,796
  27,043
  34,184
  42,234
  51,198
  61,072
  71,845
  83,879
  96,398
  109,759
  123,943
  138,932
  154,709
  171,265
  188,591
  206,686
  225,554
  245,202
  265,646
  286,904
  309,001
  331,967
  355,836
  380,649
  406,448
  433,283
  461,206
EBITDA, $m
  12,302
  14,512
  20,468
  27,630
  36,079
  45,878
  57,069
  69,677
  83,710
  99,161
  116,012
  134,239
  153,812
  174,697
  196,866
  220,288
  244,941
  270,806
  297,874
  326,141
  355,612
  386,302
  418,232
  451,431
  485,940
  521,804
  559,076
  597,819
  638,102
  679,999
  723,593
Interest expense (income), $m
  290
  532
  852
  1,598
  2,491
  3,543
  4,761
  6,150
  7,712
  9,450
  11,362
  13,446
  15,699
  18,117
  20,697
  23,434
  26,326
  29,369
  32,561
  35,900
  39,388
  43,023
  46,809
  50,747
  54,841
  59,096
  63,518
  68,113
  72,889
  77,854
  83,018
Earnings before tax, $m
  3,892
  6,547
  10,009
  13,818
  18,305
  23,500
  29,423
  36,084
  43,486
  51,622
  60,483
  70,433
  80,699
  91,642
  103,246
  115,497
  128,383
  141,896
  156,030
  170,786
  186,166
  202,179
  218,837
  236,157
  254,160
  272,871
  292,318
  312,536
  333,559
  355,428
  378,188
Tax expense, $m
  1,425
  1,768
  2,702
  3,731
  4,942
  6,345
  7,944
  9,743
  11,741
  13,938
  16,331
  19,017
  21,789
  24,743
  27,877
  31,184
  34,664
  38,312
  42,128
  46,112
  50,265
  54,588
  59,086
  63,762
  68,623
  73,675
  78,926
  84,385
  90,061
  95,966
  102,111
Net income, $m
  2,371
  4,779
  7,306
  10,087
  13,362
  17,155
  21,479
  26,342
  31,745
  37,684
  44,153
  51,416
  58,910
  66,899
  75,370
  84,313
  93,720
  103,584
  113,902
  124,673
  135,901
  147,591
  159,751
  172,395
  185,537
  199,196
  213,392
  228,151
  243,498
  259,463
  276,077

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  25,981
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  83,402
  76,780
  100,451
  128,825
  162,220
  200,877
  244,964
  294,575
  349,740
  410,435
  476,593
  548,116
  624,887
  706,783
  793,683
  885,478
  982,075
  1,083,407
  1,189,433
  1,300,142
  1,415,555
  1,535,725
  1,660,738
  1,790,713
  1,925,798
  2,066,175
  2,212,054
  2,363,676
  2,521,307
  2,685,243
  2,855,804
Adjusted assets (=assets-cash), $m
  57,421
  76,780
  100,451
  128,825
  162,220
  200,877
  244,964
  294,575
  349,740
  410,435
  476,593
  548,116
  624,887
  706,783
  793,683
  885,478
  982,075
  1,083,407
  1,189,433
  1,300,142
  1,415,555
  1,535,725
  1,660,738
  1,790,713
  1,925,798
  2,066,175
  2,212,054
  2,363,676
  2,521,307
  2,685,243
  2,855,804
Revenue / Adjusted assets
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
  2.368
Average production assets, $m
  26,399
  35,272
  46,146
  59,181
  74,523
  92,281
  112,534
  135,325
  160,668
  188,551
  218,943
  251,800
  287,068
  324,690
  364,612
  406,781
  451,157
  497,709
  546,416
  597,275
  650,295
  705,500
  762,930
  822,639
  884,696
  949,184
  1,016,200
  1,085,854
  1,158,268
  1,233,579
  1,311,934
Working capital, $m
  1,965
  -26,545
  -34,729
  -44,539
  -56,084
  -69,449
  -84,691
  -101,843
  -120,915
  -141,899
  -164,772
  -189,499
  -216,041
  -244,355
  -274,398
  -306,134
  -339,531
  -374,564
  -411,220
  -449,496
  -489,397
  -530,943
  -574,164
  -619,099
  -665,802
  -714,335
  -764,769
  -817,189
  -871,686
  -928,364
  -987,331
Total debt, $m
  19,354
  24,339
  45,643
  71,180
  101,235
  136,026
  175,704
  220,354
  270,003
  324,629
  384,171
  448,541
  517,635
  591,342
  669,552
  752,167
  839,105
  930,303
  1,025,727
  1,125,365
  1,229,237
  1,337,390
  1,449,901
  1,566,878
  1,688,455
  1,814,794
  1,946,086
  2,082,545
  2,224,413
  2,371,955
  2,525,461
Total liabilities, $m
  64,117
  69,102
  90,406
  115,943
  145,998
  180,789
  220,467
  265,117
  314,766
  369,392
  428,934
  493,304
  562,398
  636,105
  714,315
  796,930
  883,868
  975,066
  1,070,490
  1,170,128
  1,274,000
  1,382,153
  1,494,664
  1,611,641
  1,733,218
  1,859,557
  1,990,849
  2,127,308
  2,269,176
  2,416,718
  2,570,224
Total equity, $m
  19,285
  7,678
  10,045
  12,883
  16,222
  20,088
  24,496
  29,457
  34,974
  41,044
  47,659
  54,812
  62,489
  70,678
  79,368
  88,548
  98,208
  108,341
  118,943
  130,014
  141,556
  153,573
  166,074
  179,071
  192,580
  206,617
  221,205
  236,368
  252,131
  268,524
  285,580
Total liabilities and equity, $m
  83,402
  76,780
  100,451
  128,826
  162,220
  200,877
  244,963
  294,574
  349,740
  410,436
  476,593
  548,116
  624,887
  706,783
  793,683
  885,478
  982,076
  1,083,407
  1,189,433
  1,300,142
  1,415,556
  1,535,726
  1,660,738
  1,790,712
  1,925,798
  2,066,174
  2,212,054
  2,363,676
  2,521,307
  2,685,242
  2,855,804
Debt-to-equity ratio
  1.004
  3.170
  4.540
  5.530
  6.240
  6.770
  7.170
  7.480
  7.720
  7.910
  8.060
  8.180
  8.280
  8.370
  8.440
  8.490
  8.540
  8.590
  8.620
  8.660
  8.680
  8.710
  8.730
  8.750
  8.770
  8.780
  8.800
  8.810
  8.820
  8.830
  8.840
Adjusted equity ratio
  -0.117
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,371
  4,779
  7,306
  10,087
  13,362
  17,155
  21,479
  26,342
  31,745
  37,684
  44,153
  51,416
  58,910
  66,899
  75,370
  84,313
  93,720
  103,584
  113,902
  124,673
  135,901
  147,591
  159,751
  172,395
  185,537
  199,196
  213,392
  228,151
  243,498
  259,463
  276,077
Depreciation, amort., depletion, $m
  8,116
  7,433
  9,608
  12,215
  15,283
  18,835
  22,885
  27,443
  32,512
  38,089
  44,167
  50,360
  57,414
  64,938
  72,922
  81,356
  90,231
  99,542
  109,283
  119,455
  130,059
  141,100
  152,586
  164,528
  176,939
  189,837
  203,240
  217,171
  231,654
  246,716
  262,387
Funds from operations, $m
  20,359
  12,212
  16,914
  22,302
  28,645
  35,990
  44,364
  53,785
  64,257
  75,773
  88,320
  101,776
  116,324
  131,837
  148,292
  165,669
  183,951
  203,126
  223,185
  244,128
  265,960
  288,690
  312,337
  336,923
  362,476
  389,033
  416,632
  445,322
  475,152
  506,178
  538,464
Change in working capital, $m
  3,916
  -6,691
  -8,184
  -9,810
  -11,545
  -13,365
  -15,242
  -17,152
  -19,072
  -20,984
  -22,873
  -24,727
  -26,542
  -28,314
  -30,044
  -31,736
  -33,396
  -35,033
  -36,656
  -38,275
  -39,901
  -41,546
  -43,221
  -44,936
  -46,703
  -48,532
  -50,435
  -52,420
  -54,497
  -56,677
  -58,968
Cash from operations, $m
  16,443
  18,903
  25,098
  32,111
  40,191
  49,354
  59,606
  70,937
  83,329
  96,757
  111,193
  126,504
  142,866
  160,151
  178,336
  197,405
  217,348
  238,159
  259,841
  282,404
  305,861
  330,237
  355,557
  381,858
  409,179
  437,565
  467,067
  497,742
  529,649
  562,856
  597,432
Maintenance CAPEX, $m
  0
  -5,280
  -7,054
  -9,229
  -11,836
  -14,905
  -18,456
  -22,507
  -27,065
  -32,134
  -37,710
  -43,789
  -50,360
  -57,414
  -64,938
  -72,922
  -81,356
  -90,231
  -99,542
  -109,283
  -119,455
  -130,059
  -141,100
  -152,586
  -164,528
  -176,939
  -189,837
  -203,240
  -217,171
  -231,654
  -246,716
New CAPEX, $m
  -6,737
  -8,873
  -10,874
  -13,035
  -15,341
  -17,759
  -20,253
  -22,791
  -25,343
  -27,883
  -30,392
  -32,857
  -35,268
  -37,622
  -39,921
  -42,170
  -44,376
  -46,551
  -48,708
  -50,859
  -53,020
  -55,205
  -57,430
  -59,709
  -62,057
  -64,488
  -67,016
  -69,654
  -72,414
  -75,311
  -78,355
Cash from investing activities, $m
  -9,876
  -14,153
  -17,928
  -22,264
  -27,177
  -32,664
  -38,709
  -45,298
  -52,408
  -60,017
  -68,102
  -76,646
  -85,628
  -95,036
  -104,859
  -115,092
  -125,732
  -136,782
  -148,250
  -160,142
  -172,475
  -185,264
  -198,530
  -212,295
  -226,585
  -241,427
  -256,853
  -272,894
  -289,585
  -306,965
  -325,071
Free cash flow, $m
  6,567
  4,750
  7,169
  9,847
  13,013
  16,691
  20,897
  25,639
  30,921
  36,740
  43,090
  49,858
  57,238
  65,115
  73,477
  82,313
  91,615
  101,376
  111,592
  122,262
  133,387
  144,973
  157,028
  169,563
  182,594
  196,138
  210,214
  224,848
  240,064
  255,891
  272,361
Issuance/(repayment) of debt, $m
  -3,740
  9,126
  21,304
  25,537
  30,055
  34,791
  39,678
  44,650
  49,649
  54,626
  59,542
  64,370
  69,094
  73,706
  78,210
  82,615
  86,938
  91,199
  95,423
  99,638
  103,872
  108,153
  112,512
  116,977
  121,577
  126,339
  131,292
  136,459
  141,868
  147,542
  153,505
Issuance/(repurchase) of shares, $m
  0
  5,454
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,911
  14,580
  21,304
  25,537
  30,055
  34,791
  39,678
  44,650
  49,649
  54,626
  59,542
  64,370
  69,094
  73,706
  78,210
  82,615
  86,938
  91,199
  95,423
  99,638
  103,872
  108,153
  112,512
  116,977
  121,577
  126,339
  131,292
  136,459
  141,868
  147,542
  153,505
Total cash flow (excl. dividends), $m
  3,444
  19,330
  28,473
  35,384
  43,068
  51,483
  60,575
  70,289
  80,570
  91,366
  102,632
  114,229
  126,332
  138,821
  151,687
  164,928
  178,553
  192,575
  207,016
  221,900
  237,258
  253,126
  269,539
  286,540
  304,171
  322,477
  341,506
  361,307
  381,932
  403,433
  425,867
Retained Cash Flow (-), $m
  -5,901
  -10,233
  -2,367
  -2,837
  -3,339
  -3,866
  -4,409
  -4,961
  -5,517
  -6,070
  -6,616
  -7,152
  -7,677
  -8,190
  -8,690
  -9,179
  -9,660
  -10,133
  -10,603
  -11,071
  -11,541
  -12,017
  -12,501
  -12,997
  -13,509
  -14,038
  -14,588
  -15,162
  -15,763
  -16,394
  -17,056
Prev. year cash balance distribution, $m
 
  21,840
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  30,937
  26,106
  32,547
  39,729
  47,617
  56,166
  65,328
  75,053
  85,297
  96,016
  107,076
  118,655
  130,631
  142,997
  155,749
  168,893
  182,442
  196,413
  210,829
  225,717
  241,109
  257,038
  273,543
  290,662
  308,439
  326,918
  346,145
  366,169
  387,040
  408,810
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  29,661
  23,899
  28,324
  32,713
  36,909
  40,762
  44,135
  46,910
  48,998
  50,338
  50,849
  50,634
  49,668
  48,007
  45,725
  42,919
  39,696
  36,171
  32,462
  28,682
  24,939
  21,327
  17,928
  14,804
  11,999
  9,538
  7,429
  5,665
  4,225
  3,078
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Amazon.com, Inc. offers a range of products and services through its Websites. The Company operates through three segments: North America, International and Amazon Web Services (AWS). The Company's products include merchandise and content that it purchases for resale from vendors and those offered by third-party sellers. It also manufactures and sells electronic devices. The Company, through its subsidiary, Whole Foods Market, Inc., offers healthy and organic food and staples across its stores. The Company also offers a range of products like whole trade bananas, organic avocados, organic large brown eggs, organic responsibly-farmed salmon and tilapia, organic baby kale and baby lettuce, animal-welfare-rated 85% lean ground beef, creamy and crunchy almond butter, organic gala and fuji apples, organic rotisserie chicken.

FINANCIAL RATIOS  of  Amazon.com (AMZN)

Valuation Ratios
P/E Ratio 260.4
Price to Sales 4.5
Price to Book 32
Price to Tangible Book
Price to Cash Flow 37.6
Price to Free Cash Flow 63.6
Growth Rates
Sales Growth Rate 27.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 46.8%
Cap. Spend. - 3 Yr. Gr. Rate 14.4%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 78.9%
Total Debt to Equity 100.4%
Interest Coverage 14
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 1.5%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 14.5%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 32.5%
EBITDA Margin 9%
EBITDA Margin - 3 Yr. Avg. 7.3%
Operating Margin 3.1%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 36.6%
Eff/ Tax Rate - 3 Yr. Avg. -17.8%
Payout Ratio 0%

AMZN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMZN stock intrinsic value calculation we used $135987 million for the last fiscal year's total revenue generated by Amazon.com. The default revenue input number comes from 2016 income statement of Amazon.com. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AMZN stock valuation model: a) initial revenue growth rate of 33.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AMZN is calculated based on our internal credit rating of Amazon.com, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Amazon.com.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AMZN stock the variable cost ratio is equal to 93.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5102 million in the base year in the intrinsic value calculation for AMZN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Amazon.com.

Corporate tax rate of 27% is the nominal tax rate for Amazon.com. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AMZN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AMZN are equal to 19.4%.

Life of production assets of 3.7 years is the average useful life of capital assets used in Amazon.com operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AMZN is equal to -14.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $19285 million for Amazon.com - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 488.726 million for Amazon.com is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Amazon.com at the current share price and the inputted number of shares is $632.7 billion.

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COMPANY NEWS

▶ [$$] Amazon's Cashierless Convenience Store Set to Open   [10:17AM  The Wall Street Journal]
▶ What's the Ideal Stock Price for Amazon?   [10:00AM  TheStreet.com]
▶ Bill Miller's 3 Most Interesting Positions   [09:42AM  GuruFocus.com]
▶ Amazon's Blowout Holiday Season   [01:20PM  Motley Fool]
▶ [$$] Amazons People Power   [12:43AM  The Wall Street Journal]
▶ 3 Stocks That Could Put Amazon's Returns to Shame   [Jan-19-18 08:21PM  Motley Fool]
▶ Columbus only Ohio city among 20 finalists for Amazon HQ2   [05:09PM  American City Business Journals]
▶ Crunch time: What Amazon wants for its new HQ   [05:05PM  Associated Press]
▶ Apple to Build a New Campus   [05:05PM  Market Realist]
▶ What are Raleigh's chances of snagging Amazon's HQ2?   [05:02PM  American City Business Journals]
▶ Amazon Raises Monthly Fee On Prime Membership Program 18%   [04:53PM  Investor's Business Daily]
▶ Geography Is an Important Factor for Amazon HQ2   [04:18PM  Bloomberg Video]
▶ Kroger Goes After Whole Foods Head-On   [04:08PM  Motley Fool]
▶ Why Amazon's second headquarters still is NOT coming to Chicago   [04:00PM  American City Business Journals]
▶ Boston dethrones Atlanta in revised Amazon HQ2 betting odds   [03:37PM  American City Business Journals]
▶ More details emerge on one Northern Virginia HQ2 bid   [03:10PM  American City Business Journals]
▶ New HQ2 ranking: Amazon eyeing East Coast; Austin's chances not so hot   [03:05PM  American City Business Journals]
▶ All of our Amazon HQ2 coverage, right here   [03:01PM  American City Business Journals]
▶ Dallas Mayor Rawlings to Amazon's Jeff Bezos: Hey, soul sister   [02:44PM  American City Business Journals]
▶ Heres How Comcast Plans to Fight Cord-Cutting   [02:02PM  Market Realist]
▶ 3 Earnings Reports to Watch Next Week   [12:45PM  InvestorPlace]
Financial statements of AMZN
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