Amazon.com (AMZN) Could Be 46% Undervalued Following Prime Air Crash Scrutiny
Amazon.com (AMZN) is under fresh scrutiny after a Prime Air cargo aircraft crashed after landing at Miami International Airport, a deadly incident that puts the company’s logistics network in focus.
The incident comes at a time when Amazon.com’s shares have eased in the short term, with a 30 day share price return down 5.82%. However, momentum over longer horizons remains positive, including a 14.13% year to date share price return and a 3 year total shareholder return of 80.65%.
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After a sharp pullback and strong multiyear gains, Amazon.com now sits at an interesting crossroads. Is the recent weakness a sign that most of the easy upside is already behind the stock, or is there still meaningful value left on the table as the business grows?
Most Popular Narrative: 45.6% Undervalued
Amazon.com closed at $258.51, while the most followed narrative on the stock pins its fair value far higher at $475.09. That gap reflects a view that the higher margin parts of the business will matter much more over time.
Amazon is a company of two sides: a high tech, high margin side, comprising its AWS, Advertising and subscription services segments; and its more traditionally known low margin, high volume stores and third-party seller segments. These two sides form a cohesive whole. The Amazon online store motivates customers to purchase subscriptions and hosts its advertising. AWS underpins the functioning of the online store, but is also easy to integrate with for Amazon's many third-party sellers, encouraging adoption.
According to KiwiInvest, this valuation rests on a very specific mix of fast growing platform businesses and slower retail operations. The narrative leans heavily on margin expansion, higher quality earnings and a richer profit mix to justify that higher fair value.
Result: Fair Value of $475.09 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, investors still need to weigh risks such as slower adoption of higher margin services at Amazon.com, as well as potential regulatory or safety costs related to its logistics operations.
Find out about the key risks to this Amazon.com narrative.
Next Steps
With mixed sentiment around Amazon.com’s risks and rewards, it helps to move quickly and ground your view in the underlying data. To see the full balance of potential upside and downside, review the 4 key rewards and 2 important warning signs.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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