Valuecruncher

Running The Numbers: Amazon Looks Expensive

@ Andrew Krainin

I would dispute that 5% terminal growth is comparable to a large industrial.

You would expect an approximate 3% long-term growth rate for an economy like the US. Above that starts to become a material number in a DCF calculation.

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Running The Numbers: Amazon Looks Expensive

$AMZN grew revenues from $6.9bn in 2004 to $14.8bn in 2007 - a 29% CAGR in that period. Our analysis has the same growth moving forward - growth in the core business and other opportunities (i.e. Web Services). $30.5bn in 2010 is a 28% CAGR from 2007 to 2010.

Our analysis suggests $AMZN is overvalued at current share prices. Even with significant revenue growth projections and a 5% terminal growth rate. Even assuming these growth rates are achieved - the stock looks expensive.