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Amazon.com (AMZN) Falls After Earnings As Its AWS And AI Narrative Keeps Value In Focus

Simply Wall St · 1d ago

Amazon.com (AMZN) has just put fresh numbers on the table. Third quarter revenue reached US$201.9b, while net income came in at US$20.7b. Earnings per diluted share were US$1.89.

Amazon.com shares have come under pressure, with the 1 day share price return down 4.25% after the earnings release and the 90 day share price return down 10.23%. At the same time, the year to date share price return is 7.63% and the 3 year total shareholder return is 76.57%. This suggests that short term momentum is fading, while the longer record still reflects substantial gains for patient holders.

See how other AI infrastructure players are reacting to the same pressures affecting Amazon.com by filtering for 54 AI infrastructure stocks in a few clicks.

After this earnings miss and heavy AI cash burn, Amazon.com now asks you to weigh a bruised share price against a still powerful franchise. Does that trade off leave more risk or more reward at today’s valuation?

Most Popular Narrative: 48.7% Undervalued

Amazon.com last closed at $243.79, while the most followed narrative on the stock anchors fair value much higher at $475.09. That gap reflects a view that the market price is not fully crediting the high margin parts of the business.

Amazon is a company of two sides: a high tech, high margin side, comprising its AWS, Advertising and subscription services segments; and its more traditionally known low margin, high volume stores and third-party seller segments. These two sides form a cohesive whole. The Amazon online store motivates customers to purchase subscriptions and hosts its advertising. AWS underpins the functioning of the online store, but is also easy to integrate with for Amazon's many third-party sellers, encouraging adoption.

See why 317 investors see Amazon.com as 49% undervalued.

According to KiwiInvest, that blend of high margin AWS and advertising alongside lower margin retail shapes the valuation case. The narrative applies an 8.00% discount rate and arrives at a fair value almost double the current share price, which implies the AI and cloud centric side of Amazon.com is carrying more weight in the thesis than the traditional store operation.

Result: Fair Value of $475.09 (UNDERVALUED)

Still, the Amazon.com story could be knocked off course if AI and AWS demand cools, or if retail reinvestment keeps cash needs higher than bulls expect.

Find out about the key risks to this Amazon.com narrative.

Next Steps

Sentiment in the Amazon.com story is split, which is exactly why it pays to move quickly, get familiar with the data, and reach a firm view of your own. To see both sides laid out clearly, including the potential upside and what could go wrong, review the 5 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Amazon.com?

If Amazon.com has you thinking more critically about valuation and risk, do not stop here. Broaden your watchlist now before the next opportunity moves first.