Does the Recent Innovation Surge Signal a New Opportunity in Amazon in 2025?
November 25, 2025
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Wondering if Amazon.com’s share price matches its true worth? You’re in the right place for a valuation deep-dive that makes sense of the numbers.
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The stock saw a slight dip of 2.8% this past week, but has managed a 12.3% gain over the last year, plus an eye-popping 140.9% return over three years.
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Recent headlines have highlighted Amazon’s relentless innovation, from major breakthroughs in AI to continued expansion in international markets. These moves have caught the market’s attention and help explain the shifts in investor sentiment lately.
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With a valuation score of 5 out of 6 for being undervalued, Amazon.com stands out among its peers. Let’s explore the commonly-used valuation approaches. At the end, we’ll discuss an even more powerful way to think about a company’s value.
Find out why Amazon.com’s 12.3% return over the last year is lagging behind its peers.
The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today’s dollars. This provides an assessment of what the business is intrinsically worth right now.
For Amazon.com, the DCF method uses its most recent Free Cash Flow, which stands at $40.0 Billion, as a starting point. Analysts supply forecasts for the next five years. Beyond that, projections are extrapolated using growth models. By 2029, Amazon’s Free Cash Flow is expected to reach approximately $141.9 Billion, which demonstrates substantial anticipated growth. Over ten years, those annual cash flows are discounted to the present, summarizing the stream of future profitability in today’s terms.
Based on this model, Amazon’s intrinsic value is estimated at $303.07 per share. Compared to its current trading price, this suggests the stock is trading at a 25.3% discount, signaling meaningful undervaluation.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Amazon.com is undervalued by 25.3%. Track this in your watchlist or portfolio, or discover 924 more undervalued stocks based on cash flows.
When evaluating established, profitable companies like Amazon.com, the Price-to-Earnings (PE) ratio is a go-to metric. It shows how much investors are willing to pay for each dollar of net profit, making it a useful gauge for long-term, cash-generating businesses.
What counts as a “normal” or “fair” PE ratio depends on expectations. Companies with faster earnings growth and lower risks often trade at higher multiples, while slower-growing or riskier firms warrant lower ones. PE ratios are best interpreted within context, so looking at industry and market benchmarks can help.
Currently, Amazon.com trades at a PE ratio of 31.63x. For context, the Multiline Retail industry average is 19.18x and the average PE ratio for direct peers is 33.58x. While this suggests Amazon is more expensive than the wider industry, it is roughly in line with similar large-cap peers.
Simply Wall St’s “Fair Ratio” takes the comparison further. This proprietary metric calculates what Amazon’s PE should be based on its specific growth outlook, profit margin, industry, market capitalization, and risk profile. By blending these quantitative measures, the Fair Ratio offers a more tailored benchmark than broad peer or sector averages.
Amazon.com’s Fair Ratio is 36.61x, which is modestly higher than its current PE of 31.63x. This suggests the market isn’t fully pricing in the company’s growth and profitability potential.
Result: UNDERVALUED
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.
Earlier, we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your personal story or perspective about a company; it brings together your expectations for Amazon.com’s future (like forecasts of revenue, earnings, and margins) and connects them directly to a fair value estimate. Instead of just relying on ratios or analyst targets, Narratives help you put your own beliefs and research into a structured framework, making your investment decisions more meaningful.
Narratives link the company’s broader story with a financial forecast and fair value calculation, turning big ideas and news into a number you can act on. Best of all, Narratives are available in the Simply Wall St Community page, making it easy and accessible for millions of investors to create, update, and share their views with others.
They empower you to decide when to buy or sell by comparing your Fair Value to the current Price, and because Narratives update dynamically with new company information or earnings releases, your assessment always stays relevant.
For Amazon.com, investors in the Community have Narratives with fair values ranging from $217.95 (a more cautious view) up to $293.03 (a highly optimistic outlook), illustrating how different assumptions about future growth and profitability shape each investor’s unique story and investment plan.
For Amazon.com, however, we’ll make it really easy for you with previews of two leading Amazon.com Narratives:
🐂 Amazon.com Bull Case
Fair Value: $234.75
Undervalued by 3.6%
Projected Revenue Growth Rate: 13.6%
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Strong conviction in Amazon’s long-term prospects, with continued growth expected across E-commerce, AWS, and advertising segments.
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Recent financial results showed robust revenue increases, new brand partnerships, and significant investments in AI and cloud infrastructure expansion.
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The author believes current projections may be conservative given Amazon’s innovation pipeline and would buy at or near $235 for a targeted long-term annual return of 20%.
🐻 Amazon.com Bear Case
Fair Value: $222.55
Overvalued by 1.7%
Projected Revenue Growth Rate: 15.2%
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Amazon’s operating cash flows and margins are expanding rapidly, but at the current share price the stock is close to fair value, not presenting a major opportunity.
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Core segments (AWS, 3P Sellers, and Advertising) continue to perform well but there are risks to growth rates and profitability, especially if Amazon maintains high levels of reinvestment.
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The latest quarterly results mostly met expectations, but some segments (notably advertising and third-party sellers) grew a bit slower than anticipated, while operating and free cash flow remain strong.
Do you think there’s more to the story for Amazon.com? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include AMZN.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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