Amazon stock is undervalued at current levels

Amazon stock (NASDAQ:
NDAQ
: AMZN) has gained nearly 17% YTD compared to a 6% gain in the S&P500 Index over the same period. However, at its current price of $98, the stock is trading 27% below its fair value of $134 – Trefis estimates amazon rating, The company reported better-than-expected fourth-quarter revenue, with net sales rising 9% year-over-year to $149.2 billion. This was driven by 13% growth in the North America segment and 20% growth in Amazon
amzn
Sales of Web Services, partially offset by an 8% decrease in international division revenue. On the cost front, operating expenses saw an unfavorable growth in the quarter, leading to a 21% decline in operating income. In addition, non-operating income (expense) was reduced from $11.5 billion to -$3.7 billion. Overall, net income declined 98% year-over-year to $278 million.

The company’s top line grew 9% year-on-year to $514 billion in fiscal 2022. This was driven by 13% growth in North America and 29% growth in the AWS divisions, somewhat offset by an 8% decline in international segment revenue. Despite positive growth in revenue, the firm reported a net loss of $2.7 billion for the year. This was due to higher operating expenses and a significant jump in non-operating income (expense) from $13.3 billion to -$18.2 billion. Specifically, non-operating income (expense) decreased primarily due to a pre-tax valuation loss of $12.7 billion from its common stock investment in Rivian Automotive.

Going forward, AMZN expects revenue in the first quarter of 2023 to be between $121 billion and $126 billion. Overall, we forecast amazon’s revenue To touch $560 billion in FY2023. Additionally, adjusted net income margin is expected to improve for the year, resulting in net income of approximately $17.3 billion and revenue-per-share of $55.44. This combined with a P/S multiple of just above 2x would translate to a valuation of $134.

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