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Amazon is Partnering Up with Mr Beast
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- Solo FIRE
Amazon AMZN reported 13% YoY sales for Q1 2024, both of its operating cashflow and net income has exploded, up more than 100% compared to a year ago, indicating impressive margin improvements. Amazon also announced a deal with the most popular Youtuber Mr Beast to launch "Beast Games", featuring 1000 players competing for a $5 million prize, looks very interesting to me. I'm curious what you think about this, make sure to comment down below.
I use operating cashflow to value Amazon as net income and free cashflow fluctuate wildly because of the huge infrastructure investments made by the company. The stock looks undervalued, the estimated value using DCF is $224 per share, indicating a 15% CAGR, with the following conservative assumptions:
- Latest TTM operating cashflow (OCF) of $99.147 billion
- Price to OCF ratio of 20 (5YR avg is 25.96)
- OCF growth rate of 15% annually (5YR avg is 22.56%)
- Share dilution 1.2% annually (5YR avg)
- Discount rate of 10%
There are a lot of positive changes happening within Amazon. I will keep it short and only include a few items I like the most:
- AWS grew 17%. Even though it is slower than the ~30% growth of the Google cloud and Azure, it is still impressive considering AWS is the largest provider.
- AWS operating expenses DECLINED compared to a year ago, from 15.6 billion. This is a solid proof that AWS will drive more profitabilities going forward.
- AI starts to code: Amazon Q generated 100k lines of code for BT group. Software developers are expensive to hire and this service can potentially provide huge value for its clients.
I plan to hold my shares and consider buying more if the share price goes down further.
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DISCLAIMER: This post is the author's personal opinion only and none of it should be considered financial advice.