AMZN
📈 The company was trading at a more demanding valuation of around 40 times earnings, but it has become more attractive, now closer to 30 times.
☁️ Amazon’s hidden value lies in the expansion of its AWS (Amazon Web Services) cloud segment, which represents over 70% of the company’s EBIT.
📊 Even with conservative multiples, the stock presents a solid long-term investment opportunity, although the projected return is slightly below 15%.
@InvertirdesdeCero:
“Amazon. Another company that obviously was at a more demanding valuation, was trading around 40 times. It is a somewhat particular business because it is a company somewhat difficult to value since Amazon has a hidden value, which is the expansion of its AWS. So, really, the multiples of the company that have been seen historically were somewhat altered, because really the business was growing but was not yet profitable, and now it is increasingly easier to find its multiple. Clearly, the business has not changed in the last three weeks. They are going to continue to be leaders in that part of WS, and they are going to be able to implement artificial intelligence well so that growth increases. The company has fallen, I don’t know, 18% more or less. The valuation with the analysts’ estimates and applying a multiple below what it has been trading for all its life of 30 times, this is tricky, we will see it in the course, because it is what I told you, there is enormous potential still for that monetization of the WS. Think that people believe that Amazon’s business is selling products in its online store, and that is not true. What really matters is the part of the WS, which already represents more than 70% of the company’s EBIT. So this is key, and that is going to make it really, according to when you are investing, you are going to obtain a better result. What you have to be very good at is applying the multiple. This is super important, and people, well, if you don’t understand a bit of valuation, it’s complicated to understand. You can see it here. The multiple of this company has been reducing. I’m going to put it here in 5 years with the passage of time. You see, this is usually, we will see it in the course, associated with something negative because the stock falls. Think that the PER is the relationship between the price per share and the earnings per share. So, normally, this is associated with it falling, and it is not like that. The multiple has fallen because the earnings per share have now been more similar to what they really are. So it is increasingly easier to value this company. Right now, we are at one of its valuations, but I tell you, it is a bit distorted, more attractive, that you can find. So it seems to me a brutal company to have in the portfolio in the long term, despite the fact that the return you see here is not more than 15, that we always try to demand more than 15, but it is a company to really have, well, all your life. Obviously, none of the things I am telling you is for you to do them, because if someone now takes, buys Alphabet and Amazon because I said I like them, when they fall, because they can fall 30%, I am not going to pick up the phone to reassure you because I am not recommending. What I am showing you is how I value it, and if it falls 30%, I will be calm. The question is if you are going to be, and for that, it is what I told you before, have the knowledge.”
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