Amazon.com, Inc.AMZNNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $182.93 per share(market-calibrated)

-12.2%

Upside to Fair Value

Current

$208.39

Pure Model

$179.26

Fair Value

$182.93

Bull Case

$247.97

Bear Case

$123.29

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

6.26%

Calibrated Growth

3.49%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $179.26.

What's Driving This Ratingfor AMZN

↓

CapEx normalizing toward maintenance

Historical CapEx is 10.94% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$113.5B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 7.98% — below the sector mature average of 12.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $174.6B (10.68% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 12.28% revenue growth in Year 1, fading to 10.37% by Year 5 and 3.00% by Year 10. Revenue reaches $1.6T by Year 10 (vs $716.9B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $124.18/share (14.5x terminal FCF) while exit multiple gives $234.34/share (31.6x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $208.39, the market implies 6.26% perpetual growth — 326bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 63.38% indicates efficient cash generation. FCF reaches $181.0B by Year 10 (11.08% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.39

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.73%

Cost of Debt

Pre-tax Cost of Debt1.57%

Tax Rate19.73%

After-tax Cost of Debt1.26%

Equity Weight (E/V)93.58%

Debt Weight (D/V)6.42%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (93.58% × 10.73%) + (6.42% × 1.26%)

= 10.12%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$805.0B	$1.0T	$1.2T	$1.4T	$1.6T
EBIT	$64.3B	$80.4B	$97.8B	$135.2B	$174.6B
Tax	$12.7B	$15.9B	$19.3B	$26.7B	$34.4B
NOPAT	$51.6B	$64.6B	$78.5B	$108.5B	$140.2B
+ Depreciation	$54.7B	$68.4B	$83.2B	$97.3B	$111.0B
- Capex	$88.1B	$94.7B	$96.3B	$90.5B	$65.4B
- Δ NWC	$8.8B	$10.9B	$11.5B	$9.9B	$4.8B
Free Cash Flow	$9.4B	$27.4B	$54.0B	$105.4B	$181.0B
Discount Factor	0.908	0.749	0.617	0.509	0.381
Present Value	$8.5B	$20.5B	$33.3B	$53.7B	$69.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$181.0B

Terminal Growth Rate3.00%

WACC10.12%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$2.6T

PV of Terminal Value$997.4B

Exit Multiple Method

Year 10 EBITDA$285.6B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$5.7T

PV of Terminal Value$2.2T

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$398.6B

PV of Terminal Value$997.4B

Enterprise Value$1.4T

(-) Net Debt$66.2B

Equity Value$1.3T

Shares Outstanding10.7B

Price per Share$124.18

Exit Multiple Method

PV of Projected FCFs$398.6B

PV of Terminal Value$2.2T

Enterprise Value$2.6T

(-) Net Debt$66.2B

Equity Value$2.5T

Shares Outstanding10.7B

Price per Share$234.34

Pure Model Fair Value

$179.26

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
8.12%	$222.71	$228.78	$236.03	$244.86	$255.82
9.12%	$195.38	$199.46	$204.20	$209.79	$216.47
10.12%	$173.13	$175.99	$179.26	$183.01	$187.38
11.12%	$154.52	$156.60	$158.94	$161.58	$164.59
12.12%	$138.68	$140.23	$141.94	$143.86	$146.01

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$123.29

-40.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.73

Base Case

$179.26

-14.0% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.39

Bull Case

$247.97

19.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.18

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth12.28%

Year 3 Revenue Growth12.08%

Year 5 Revenue Growth10.37%

Year 7 Revenue Growth7.42%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin7.98%

Terminal EBIT Margin12.00%

Tax Rate19.73%

Historical Capex / Rev10.94%

Terminal Capex / Rev4.00%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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