Amazon Stock May Still Be Undervalued Despite Strong Run

Amazon's stock price has risen significantly over the past three years, delivering a return of 103.0%. However, current valuation checks suggest that the market price may still be below what its fundamentals imply.

The company's intrinsic value estimate using a Discounted Cash Flow (DCF) approach suggests that Amazon is worth around $429 per share, compared to its current market price of about $284. This puts the stock at a discount of 33.9% relative to its estimated intrinsic value.

Amazon also scores well on the earnings multiple view, with a P/E ratio of 22.6x, which is below both the broader multiline retail industry average and the peer group average. The Fair P/E Ratio model suggests that Amazon's P/E should be around 37.6x, indicating that the stock trades at a discount compared to its fundamental value.

However, the company's heavy spending on artificial intelligence, cloud infrastructure, and new projects like Zoox robotaxis may weigh on investor willingness to pay for future cash flows. Regulatory and legal scrutiny also pose risks for Amazon's valuation.