馃攳
Amazon Stock Analysis - is Amazon's Stock a Good Buy Today? AMZN Stock Analysis - YouTube
Channel: Learn to Invest - Investors Grow
[0]
hi i'm jimmy in this video looking at
[2]
amazon stock ticker symbol amzn so the
[6]
goal of this video is to look quickly at
[7]
amazon's business then we're going to
[9]
look at some recent developments
[11]
specifically some headwinds that the
[12]
company appears to be facing and then
[14]
finally we're going to try to come up
[15]
with a fair value for amazon stock using
[18]
discount of free cash flow now before we
[20]
jump into our amazon analysis i just
[22]
want to tell you about a website that
[23]
we're almost done building we've been
[25]
saying it'll be ready by the end of june
[26]
we're now in june and it should be done
[29]
any week now but basically the point of
[31]
this website the early phases of the
[33]
website is you can punch in the ticker
[35]
symbol of the company that you're
[36]
interested in the website will then pull
[39]
down estimates for free cash flow from
[41]
analysts so it'll automatically pull
[43]
down analyst estimates for free cash
[45]
flow it'll calculate the fair value of
[47]
the stock using discount of free cash
[49]
flow for me i'm using a required rate of
[51]
return of seven and a half percent but
[53]
of course you can customize that to use
[54]
whatever you want or you can use the
[56]
company's own weighted average cost of
[58]
capital the goal of this website is to
[60]
make it quick and easy to come up with a
[62]
fair value for stocks to see which
[64]
stocks we should do a deeper dive on and
[66]
then if it's a stock that you like and
[68]
you do the research this website is
[70]
there to help you come up with where you
[72]
should buy it at what point should you
[74]
consider investing in the stock below
[76]
what price so if you'd like to sign up
[78]
for this website the advantage to
[80]
signing up before the website goes live
[82]
which should again be any week now but
[84]
the advantage of signing up before it
[86]
goes live is we are locking in the price
[88]
indefinitely so the price will never go
[90]
up on you if you sign up before the
[92]
website goes live so again a link in the
[94]
description below okay now we're gonna
[95]
jump back to our amazon analysis and
[97]
we're gonna kick it off with amazon's
[99]
business segments so their largest
[101]
segment is clearly their online stores
[103]
business this is exactly what it sounds
[104]
like amazon.com
[106]
their online store business related to
[109]
that is their third-party seller
[111]
services which if you are a retailer if
[113]
you sell products you can sell products
[115]
on amazon and they get a cut of that
[117]
that is where that revenue comes from by
[119]
the way this revenue is this breakdown
[121]
of percentages is based on the most
[123]
recent completed year which is 2021.
[126]
okay then we have aws aws is short for
[129]
amazon web services that accounts for
[132]
about 13
[133]
of their overall revenue now this is an
[136]
important segment because one this is
[138]
their fastest growing segment but also
[140]
it's a segment that generates the
[142]
highest margins for them so in time this
[145]
segment's going to get more and more
[147]
important i just want to bring that out
[149]
okay then we have subscription services
[150]
which is account which accounts for
[152]
about seven percent of their total
[154]
revenue after that is their advertising
[156]
services business and this is where
[158]
those third-party sellers that i
[159]
mentioned before people can advertise on
[162]
the website and of course amazon is able
[163]
to generate some revenue from that
[165]
finally we have their physical stores
[168]
now of course their physical stores
[169]
aren't nearly as prevalent as their
[171]
online business but it is a growing part
[174]
of their business so i would expect to
[175]
see this revenue ramp up in coming years
[177]
as well okay so now let's jump over to
[179]
some recent developments so one of the
[182]
biggest recent and i think this is one
[183]
of the most important recent
[184]
developments for amazon's business is
[187]
their current excess capacity when we
[190]
look at this chart here well this is a
[191]
chart of their total square footage of
[193]
the total square footage that amazon
[194]
controls ultimately in their
[196]
distribution network and we can see that
[199]
in the past two years specifically from
[200]
2019 to 2021
[203]
mostly due to covid and the excitement
[206]
of round cover were the issues with
[207]
covid and the limited capacity that they
[210]
had well amazon really ramped up their
[213]
total capacity
[214]
the problem with that is that they
[217]
ultimately went too far with it they
[220]
built too much capacity to the point
[222]
that they ended up with excess capacity
[225]
so one of the problems with this is this
[227]
leads to lower profit margins when we
[230]
look at their you know the excess
[232]
capacity they have to pay for square
[234]
footage that one they don't need and
[236]
they're not using right now now this is
[238]
i believe a short-term problem because
[242]
they will their the company is growing
[244]
quick enough that they will grow into
[245]
that capacity but in the near term this
[248]
is affecting their overall numbers in
[250]
fact if we look at some quarterly
[252]
numbers for this is their their net
[254]
profit margins what percentage of
[257]
revenue has turned into profit well we
[259]
can see in the past few quarters these
[261]
past three quarters here
[263]
profit is down part of the reason for
[265]
that is because they were building
[267]
excess capacity and they have to cover
[269]
the cost for that capacity but over the
[271]
long run i do expect for them to
[273]
gradually grow into that so where this
[276]
is a net negative now over the next
[279]
couple years a lot of that should shake
[280]
itself out and i would expect for them
[282]
to continue
[284]
their
[285]
their improving profit margins which it
[287]
was clearly doing before this whole
[289]
downtick happened that being said
[291]
another development out of the most
[292]
recent earnings report is the loss the
[296]
right down that they took in their
[298]
rivian investment so amazon owns a piece
[301]
of rivien which is a publicly traded
[303]
electric vehicle company and
[306]
the issue with that is that as the stock
[308]
rivian stock moves up and down they take
[311]
basically gains and losses based on how
[314]
that stock moves
[315]
not the most recent quarter but the
[317]
quarter before that they had a huge gain
[319]
because the stock was up this most
[320]
recent quarter this stock pulled back so
[322]
they get a huge write down but this is a
[324]
big deal because if you look at their
[327]
their on the books earnings their u.s
[330]
gaap earnings earnings per share was
[332]
negative seven dollars and 56 cents but
[335]
if you were to remove the rivian
[337]
investment if you were to make the
[338]
necessary adjustments as we should do
[340]
any time we're analyzing a company we
[342]
should remove these non-operational
[344]
investments on these non-operational
[346]
expenses
[348]
and what we do is when we remove that
[349]
well we end up with a positive earnings
[351]
per share of 4.24 cents that could
[354]
easily be converted over into net income
[356]
net income is just net income earnings
[358]
per share is just net income divided by
[361]
the shares outstanding and when we look
[363]
at this chart of their net income going
[366]
back to 2007 well we can see in the past
[369]
few years again these are this is an
[371]
adjusted chart so we've excluded the
[374]
ribbing investments both on the positive
[376]
side and on the negative side and any
[377]
other one-time write-offs or write-ups
[380]
or write-downs that they might have
[382]
ignoring that we can see that their
[384]
profit has really ramped up nicely in
[387]
recent years these are annual numbers
[389]
okay that being said let's look over at
[391]
amazon's revenue which really shows how
[394]
quickly amazon's revenue has been
[397]
growing
[398]
but one concern about their revenue is
[400]
that revenue although it is growing
[403]
big jump in 2022 it is expected that
[405]
revenue growth will gradually decline so
[407]
it won't it'll still grow just not as
[409]
fast
[410]
okay now before we jump over to the fair
[412]
our fair value calculation for amazon
[414]
stock let's look quickly at their shares
[417]
outstanding so this is a chart of amazon
[419]
shares outstanding once again going back
[421]
to 2007. so the first thing we may
[424]
notice is that shares outstanding over
[426]
the past two decades or so 15 years 15
[429]
20 years whatever it is have gradually
[431]
drifted higher now amazon does have a
[434]
buy back program and they have done some
[436]
stock buybacks but amazon also has many
[440]
of their employees management people
[442]
that work in the company get stock
[444]
options oftentimes those stock options
[446]
add to the shares outstanding which is
[448]
why we would gradually see an increase
[450]
in the number of shares outstanding that
[452]
they have so this is something for us to
[454]
keep in the back of our mind although
[455]
i'm not sure it totally
[457]
sways whether or not we would invest in
[459]
the stock but it's not like they're out
[460]
there raising money because they need
[462]
excess capital they have the money
[464]
they're just paying out some of their
[465]
employees mostly in stock options okay
[468]
now let's switch over to our fair value
[469]
calculation for amazon stock using
[471]
discount of free cash flow
[473]
so the interesting part about amazon
[474]
right now is amazon's about to go
[476]
through a 20 for one stock split so
[479]
we're filming this video on friday
[482]
friday the day though friday before the
[485]
stock split which happens on monday
[487]
right now amazon stock midday is about
[491]
400 bucks per share so to account for
[493]
the fact that there's going to be a
[495]
stock split basically what we would do
[496]
is we would take the most recent stock
[498]
price divided by in this case divided by
[500]
20 since it's a 241 stock split but we
[503]
would also have to multiply the shares
[506]
outstanding by 20.
[508]
that's pretty much the only adjustments
[510]
that need to be made
[511]
because the fair value of the stock
[513]
shouldn't change just because there's a
[515]
stock split stock stock split doesn't
[518]
create any value it just shifts the way
[520]
it is for example imagine you had a
[522]
pizza pie and that pizza pie instead of
[524]
being cut into eight slices it was cut
[526]
into 10 or 15 or 20 or 30. well you're
[529]
not creating any new food you're just
[532]
changing how big each slice is
[534]
all this 21 stock split is doing is
[537]
divvying up the value of the company
[538]
into more individual smaller pieces
[541]
so what we've done is we've we've
[544]
adjusted this calculation to account for
[547]
the post stock split so if you're
[549]
watching this video anytime after the
[551]
stock split has happened this is the
[553]
fair value calculation we're getting
[555]
proportionally same as what it was
[557]
before we did the adjustment but right
[560]
now we have the fair value the current
[562]
stock price at about 121 dollars per
[564]
share the fair value is up at about 113
[567]
dollars per share so it looks like as of
[571]
right now amazon stock appears to be
[574]
slightly overvalued now what this
[576]
calculation does is it takes analyst
[579]
estimates for free cash flow
[581]
and we calculated additional years so we
[584]
went on a total of 10 additional years
[586]
we had the computer calculate at 10
[588]
additional years and during those 10
[590]
additional years we gradually decreased
[593]
how fast amazon stock was growing we
[596]
actually elected to do a 13 growth rate
[599]
which is when we look at the revenue
[600]
growth in recent years well it's on the
[603]
more conservative side one of the
[605]
reasons i want to be more conservative
[607]
here is that in recent years amazon's
[610]
free cash flow hasn't been terribly
[611]
consistent now as they get larger and
[613]
they are able to generate more free cash
[615]
flow i would expect their free cash flow
[617]
to get more consistent but i wanted to
[620]
take a slightly more conservative
[621]
approach and using this conservative
[623]
approach again the stock looks slightly
[625]
overvalued so for me i like amazon's
[629]
business i like what they're doing i
[630]
think they're going to grow into their
[632]
capacity and over the long run i think
[634]
amazon's business will do very well i'd
[637]
like to see personally for this stock to
[640]
drop from about the 121 level down to
[644]
closer to 100 per share that would give
[646]
me a bit of margin of safety
[649]
below my 113 fair value calculation so
[652]
if we can get amazon stock to drop near
[654]
100 i'd be much more inclined to jump in
[656]
and buy that so in the meantime what i'm
[659]
going to be doing is although i'm not
[660]
going to buy amazon stock i am going to
[662]
add amazon stock to my bullpen that way
[665]
i can watch it and if the stock gets to
[667]
a good price i will happily jump in and
[669]
buy some of that with that being said if
[671]
you'd like to sign up to get access to
[672]
this website i will leave a link right
[674]
here i'll leave a link in the
[674]
description below and thank you so much
[676]
for sticking with me all the way to the
[678]
end of the video i really do appreciate
[679]
it thank you and i'll see in the next
[681]
video
Most Recent Videos:
You can go back to the homepage right here: Homepage