Amazon Overvaluation Estimated at $56 Per Share

A recent DCF analysis for Amazon.com Inc (AMZN) suggests that the company is modestly overvalued, according to GuruFocus. The current price stands at $266.43, reflecting a year-to-date increase of 15.4%. However, the earnings-based intrinsic value is estimated at $210.38 per share, indicating a margin of safety of -26.6% compared to the current price.

The DCF analysis uses a two-stage approach to estimate the intrinsic value of AMZN. In the growth phase, earnings per share (EPS) are expected to grow at a rate of 47.3% annually for the next ten years. The terminal phase assumes a slower growth rate of 4% for the subsequent ten years, with an applied discount rate of 11%. This discount rate is derived from the risk-free rate and equity risk premium.

GuruFocus uses EPS excluding non-recurring items in their DCF analysis, as research shows a stronger correlation between stock prices and earnings than with free cash flow. The absence of FCF-based intrinsic value means that only the earnings-based DCF can be compared to the GF Value™, which is calculated at $247.18.

The strong overall performance of AMZN is reflected in its GF Score™ of 93/100, although its predictability rank of 1/5 stars suggests caution in relying solely on the DCF model for this stock.