Analysts at Morgan Stanley estimated that the fair value of Amazon.com, Inc. (NASDAQ:AMZN) is $323 per share based on the sum-of-the-parts (SOTP) analysis on the company’s business segments.
Morgan Stanley analysts, Scott Devitt, Stephen Shin, and Nishant Verman believe the e-commerce giant has better opportunities over the long-term than short-term. They also warned that Amazon.com, Inc. (NASDAQ:AMZN) might experience the so-called “Wal-Mart Decade” if it fails to improve its operation metrics soon. They noted that the e-commerce giant recorded five consecutive quarters of decline in paid unit growth.
Amazon.com, Inc. (NASDAQ:AMZN) price target
The analysts have an overweight rating with a price target of $314 for the shares of Amazon.com, Inc. (NASDAQ:AMZN). Devitt and his fellow analyst explained that their price target for the stock was based on a discounted cash flow model and SOTP analysis to provide a different perspective on valuation to help investors clearly understand what they are paying for when purchasing the shares of the company.
In a note to investors, the analysts estimated that the value of Amazon Web Services (AWS) is $25 billion, and they believed that Amazon.com, Inc. (NASDAQ:AMZN) has the ability to become one of the top five information technology (IT) vendor within the $152 billion addressable market. Devit and his colleagues believe that AWS revenue will grow from $2 billion last year to over $24 billion by 2022 by through a combination of compelling value proposition to customers and disruptive models for existing IT vendors.
Amazon.com, Inc. (NASDAQ:AMZN) Kindle value
Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle Franchise has a valuation of $23 billion. The analysts estimated that the franchise accounts 11% of the company’s revenue and 23% of CSOI this year. The analysts noted that eBooks became a multi-billion category for the e-commerce giant after five years. Its growth accelerated 70% year-over-year, and the analysts believe that Amazon is well positions to continue to increase its market share in Ebooks under its pricing models.
Amazon.com, Inc. (NASDAQ:AMZN) retail value
On the other hand, the Retail Business of Amazon.com, Inc. (NASDAQ:AMZN)’s is $108 billion. They projected that the e-commerce giant generated ~$80 billion in GMV from its retail business excluding the Kindle Franchise worldwide. According to them, its business model is strong to grow higher than the growth rate of the entire e-Commerce. They estimated that Amazon’s GMV will climb by ~22% over the next two years, and will exceed the GMV of all competitors except Wal-Mart Stores, Inc. (NYSE:WMT).