Amazon Stock Slumps to Historically Low Valuation Amid Strong Growth
Amazon (NASDAQ: AMZN) is trading at a historically low valuation. Despite its strong growth in cloud services, advertising revenue, and operating income, Amazon's stock price has not kept pace.
The company's forward earnings multiple of 23x is more typical of a mature retailer, not a business with AWS growing at 37% year-over-year. Even Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL), which have similar ads-plus-cloud models, trade at richer multiples.
AWS's growth has been accelerating, and Andy Jassy told investors that the division could become a trillion-dollar business. The company's chips business is also growing rapidly, exceeding $25 billion in annual revenue.
However, Amazon's capex guidance for 2026 is $200 billion, which has pushed its free cash flow negative. But even the bear case still implies a 13% gain over the next year.