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Amazon: A Potential Bottom-Fishing Opportunity At $2,000

May 04, 2022 7:42 AM ETAmazon.com, Inc. (AMZN)MO, RIVN45 Comments
Albert Lin, CFA profile picture
Albert Lin, CFA


  • E-commerce is challenged by slower growth and inflation.
  • The Rivian bet is doing more harm than good.
  • On the bright side, AWS remains the most meaningful value driver.
  • Advertising is the icing on the cake.
  • At $2,000, investors can pick up AWS and Advertising at a fair price, while getting the retail business virtually for free.

Aerial view of Amazon Prime distribution warehouse and fulfilment centre

Teamjackson/iStock Editorial via Getty Images


Amazon (NASDAQ:AMZN) reported disappointing 1Q22 earnings with inline revenue of $116 billion (+7% YoY), an operating margin of 3% vs. 5% consensus, and a whooping net loss of $3.8 billion as a result of higher inflationary pressure and a $7.6 billion pretax loss

This article was written by

Albert Lin, CFA profile picture
Entrepreneur turned investment analyst. I aim to provide readers on Seeking Alpha with differentiated, concise, and actionable investment advice through good old-fashioned fundamental analysis with a strong emphasis on valuation. Focus mainly on tech and consumer. If you find my analysis interesting and helpful, follow me to be the first to read my latest articles.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (45)

Lots of comments derided this article when it was published. I thought it was intriguing. AMZN closed at $2107 today. Getting close. But my question is, if it does hit $2,000, is that still a good entry point in this market?
Albert Lin, CFA profile picture
@GettingReal Great question. While I think it's a potential opportunity at $2000, conservative investors should probably wait for prices to stabilize before pulling the trigger in this volatile market.
@Albert Lin, CFA Thanks. AMZN is an amazing stock with large moats around several huge global revenue streams (cloud, retail, delivery, prime, etc.). Having not bought in early, my issue has always only been price. Anything below $2000 looks like a good entry point. Lower is a bonus.
MSFT make nearly twice as much profit as AMZN, pay 1% dividend vs 0%, and have a P/E ratio of 30x vs 45x for AMZN. AMZN actually make quite a bit less money than FB despite their much higher gross revenues. Incidentally FBs P/E is now down to 16x.

The author may be right that AMZN may still be overpriced until it drops to $2K.
Boatdock11 profile picture
2k? Pffft … it’s cloud business alone would never ever drive the stock that low…. I hope it goes lower so I can load the boat but no way you see 2k with this stock … every single analyst disagrees with your thesis and so do I.
Albert Lin, CFA profile picture
@Boatdock11 And why do you think there's no way the stock would reach $2000? Were you on the side of the many analysts with PT >$4000 who probably never thought the stock would fall 14% post-earnings and reach $2400?
Elon the GOAT profile picture
@Boatdock11 you are not an analyst. And yes, I agree with the author and I think we can see a 1 handle for this stock this year
@Boatdock11 I agree with the author.
Fishintx profile picture
I don't buy fromthe leftist Bezos, why would I invest in his bottom feeding company. I believe in value not low prices.
@Fishintx okay that’s fine - no biggie.
AMZN is one of the most successful companies on the planet for a reason. Confident on a bounce back.
I’ll save everyone time so you don’t have to read the article. If the stock drops by 20%, it will be a good buy. No shit

Without AWS, their net FCF is less than 2%
@reddyrm Irrelevant, is AWS going away? Are they selling it?
Boatdock11 profile picture
@ds634843 perfect
I noticed that you said when and not if AMZN reaches $2,000. One never knows, I will buy it down and believe all their ancillary businesses might spin off at some point. The main thing for me is that ten years from now the price has doubled and the dividend is robust. I'm guessing it will be.
@Albert Lin thanks for your views. A fundamental assumption in your AWS valuation is EV/EBIT of 25. Not even 70-80% fast growing software SAAS cos enjoy that multiple today. Whilst Cloud business remains in growth mode, the growth % are only expected to normalise to close to 18-20% in 3 years time. So another assumption about 37-40% growth rates is a bit ambitious. If you changed these two, coupled with post covid online business challenge (and RIVN still in infancy for next 3-5yrs), a high PE of 40 looks extremely debatable in the bear market we are in
Albert Lin, CFA profile picture

My assumption is for AWS to grow along with the industry at a 29% CAGR from 2021 to 2023 vs. 37-40%. As for the target multiple, I think it makes sense to have one that's inline with AWS' closest competitor Microsoft at 25x EV/EBIT. This gives us a 22/23 EV/EBIT/growth ratio of 0.6/0.8, not entirely out of touch with reality considering how profitable AWS is.

As you can see below some of the higher growth players in the cloud space are trading at much higher EV/EBIT multiples.

MSFT: 25
CRM: 29
ADBE: 25

IBM: 15
ORCL: 13

SNOW: 1.6k
NET: 2.3k
DDOG: 236
craftbrewinfo profile picture
who would have ever thought to use the word bottom feeding and Amazon in the same sentence.. SMH....
Would not want to see the state of the economy if this falls to 2,000. Like you said, that would literally be Valuing the global leader in e-commerce, hundreds of millions of prime members, logistics and 3PL and fulfillment business at basically $0. Meaning it’s worthless.
That’s how you know the market is getting oversold.
Good read and 2k would be great. However, as its down ~25% (depending on date) I’ve already started nibbling. My first Amazon buys and glad I didn’t buy recently (up to 3700! ). Want to pick up a few prior to the split to see if there is any bounce but really I’m ‘buy and hold’ .
Michink profile picture
I won't buy any share as the as the stock trades above 1800$/share. It's a value stock now aside from their cloud business
azarlee profile picture
Held this stock for years and years….divided it by 20 yesterday and with the 20:1 I will be back to the original number…..stuck the liquidity all into AAPL,MSFT, TSLA….for me the stock did extremely well and I did not sell panicking but simply out of a slightly foreboding sentiment which induced me to act.
They need to give a divident
$2,000? More like $1,000.
Buggah profile picture
@Minor Enthusiast !remindme 3 months
Gary J is Rich on AMZN profile picture
@Minor Enthusiast

Big 5 figure move up yesterday for me.
Jamjack profile picture
An older buy order snapped into action for me at 2450. Fingers crossed.
Plan Man profile picture
Hate amazon, $2000 would be a good price point of entry. Id recommend people recognize notable legal liabilities what with operating contracts with “partners” in a way specifically designed to hurt said partners. This includes using data from partner sales to creat a competing product then removing the company from Amazon’s market place. This could bite amazon in the ass if companies decide to drop amazon in tandem.
Gary J is Rich on AMZN profile picture
@Plan Man

LOL Amazon partners refers to AWS (if you even knew).

"The AWS Partner Network (APN) is a global community of partners that leverages programs, expertise, and resources to build, market, and sell customer offerings. This diverse network features 100,000 partners from more than 150 countries.

Become an AWS Partner | AWS Partner Network - Amazon AWS"
Plan Man profile picture
@Gary J is Rich on AMZN i was referring to retail partners. Amazon has kicked out a number of partners without real warning after offering competing products which is a legal liability. I just wanted to make people aware as that could have drastic effects on Amazon’s core business (until aws takes over online shopping). At this point you invest in Amazon for its AWS.
Gary J is Rich on AMZN profile picture
@Plan Man

"i was referring to retail partners."

Glad you corrected yourself. Disregarding the rest.
If inflation shows ANY signs of easing AMZN will rip. Here's the thing. Inflation has been on the rise since 2009. Bitcoin went from .01 to 65k. that was the result of INFLATION. Now its too late to worry about the inflation trade since JP is crushing it. Once this eases then this stock will rocket to the upside.
@DomL I would disagree. Bitcoin went up on speculation, not inflation.
Gary J is Rich on AMZN profile picture
Good bull case but good luck with LOL $2k.
@Gary J is Rich on AMZN I am certainly NOT sure Amazon can remain above $2,000. Its financial situation is crumbling!
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