Stock Valuation and Analysis
Stock Valuation and Analysis: Amazon.com, Inc.
Stock valuation is calculating the theoretical value of a company and their stocks. The
significance of stock valuation includes the ability to predict future market prices, and to profit to the pricing movements. During the stock valuation process, stocks are placed or judged based on two different categories; either undervalued or overvalued. Those stocks that are categorized as undervalued are bought. Overvalued stocks are sold, in hopes that undervalued stocks will increase in value. Overvalued stocks generally will decrease in value. An important role in fundamental financial analysis in this case, would be to make a comparison between companies that perform the either the same, or very similar activity, and are very close to the same size (Baresa 2013). The following discussion will answer questions as they relate to the stock valuation of Amazon.com, Inc., and analyze the findings based on the results.
Stock Valuation Statistics
1) Question: What is the ticker symbol for Amazon.com, Inc. Answer: AMZN.
2) Question: What is the Current Stock Price? Answer: $934.15 as of May 5, 2017 at 4 PM EST (Yahoo! Finance 2017).
3) Question: What is the Market Cap Stock Price? Answer: As of May 5, 2017, the Market Cap Stock Price for Amazon.com, Inc. is $446.50B (Yahoo! Finance 2017).
4) Question: What is the Price to Earnings Ratio? Answer: At the close of the 2016 fiscal period, Amazon.com, Inc.’s price to Earnings Ratio was $191.33.
5) Question: What is the Dividend and Yield? Answer: $0.00 and $0.00.
6) Question: What is the Enterprise Value? Answer: $440,930M (Yahoo! Finance 2017)
· In order for Amazon.com, Inc. to be bought, it would take $440,930M.
7) Question: What is the Beta? Answer: As of May 8, 2017 at 4:25 am EDT, Amazon’s Beta is 1.48.
8) Question: Was there a Stock Split, and if so, when? Answer: Yes.
9) Question: What was the closing stock price for the last 5 days? Answer: May 1, 2017–$948.23, May 2, 2017–$$946.94, May 3, 2017–$$941.03, May 4, 2017–$937.53, May 5, 2017–$934.15.
10) Question: What was the 52 Week High for this stock? Answer: $954.40
11) Question: What is the Book Value per Share? Answer: $45.34 (Yahoo! Finance 2017)
12) Question: What type of rating are analysts recommending? Answer: Strong Buy
13) Question: What is the target price analysts are predicting for this stock? Answer: The 12-month target price for Amazon based on 39 analysts is a median of $1080, with a high estimate of $1250, and a low estimate of $850 (Yahoo! Finance 2017).
14) Question: What is the analyst’s average revenue estimate for next year? Answer: Based on 36 financial analysts, the average estimate of revenue for Amazon.com, Inc. for June 2017 is $37.16B, with a high estimate of $37.74B, and a low estimate of $36.45B (Yahoo! Finance 2017).
15) Question: What are some of the significant news items and press releases made by the company over the last year? Answer: The following Press Releases and news have been announced by Amazon.com, Inc. since April 21, 2017:
· April 21, 2017: Amazon to create more than 2500 full-time jobs at three additional New Jersey fulfillment centers (Amazon 2017).
· April 27, 2017: Amazon announces 1st quarter sales up to $35.7B, an increase of 23% (Amazon 2017).
· May 1, 2017: Amazon gives Prime to every household in Manchester-by-the-Sea for one year, MA as Academy Award Winning Film comes to Prime Video (Amazon 2017).
Relationships between Stock Valuation Determinants
The stock price for a share of Amazon stock is currently $934.15, which means that in order to have just one share of Amazon stock, investors would need to purchase it at this price. The price to earnings ratio of $191.33 in relation to the current stock price indicates that while each share of Amazon.com, Inc. stock is $934.15, each investor is willing to pay $191.33 to gain $1.00 for each dollar of Amazon’s earnings.
The Market Capitalization of $446.50B is the market value of Amazon’s shares that remain outstanding. Investors are interested in the size of a company before they make any investments. The Market Capitalization also illustrates to investors how much of a risk they are taking when making such an investment. Amazon.com, Inc. is a large-cap company, as its Market Capitalization is more than $10B, which means that it is well-established. A beta of 1 shows that the price of a company’s stock moves with the market. If it is less than 1, then it is more volatile than the market. Conversely, a beta of more than 1 indicates a higher rate of return, but more of a risk. With a beta of 1.48, Amazon.com, Inc. illustrates that while there is a high rate of return, there is still great risk associated with investing in the company. This is true for most stock investments.
Reasons to Invest in Amazon.com, Inc.
Amazon.com, Inc. was created based on an investment of just $5,000. made by CEO, Jeff Bezos in 1997. As online retail sales grows into the primary method of shopping, Amazon is a name becomes more and more synonymous with the word, “shopping.” Amazon.com, Inc. continues to dismantle very popular physical retailers. Examples include JC Penny, Sears, Macy’s Kohl’s, Abercrombie & Fitch and the Office Depot, just to name a few. Amazon will continue to gain more and more traffic from e-commerce, which will ultimately lead to larger numbers of shareholders in the coming years. (Tenebruso 2017).
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