1/$Amazon(AMZN.US) is currently the cheapest mega-cap (Mag 7) stock.

Even with conservative assumptions, the stock price could easily double from its current level.

Here's everything you need to know about investing in $Amazon(AMZN.US) 👇

2/ $Amazon(AMZN.US) is leading three high-growth markets.

It is the market leader in e-commerce and cloud computing, while also being the fastest-growing advertising business among large tech companies.

These divisions currently generate over $50 billion in combined annual revenue.

3/ Cloud business is $Amazon(AMZN.US) "cash cow".

This division brings in over $107 billion in revenue, with an average annual growth rate of 24% since 2020.

$Amazon(AMZN.US) cloud business has an operating margin of about 37%.

With the AI boom driving cloud computing demand, this business is expected to continue growing rapidly.

4/ $Amazon(AMZN.US) currently dominates the global cloud market.

As of last quarter, AWS had a 30% market share in the global cloud market, second only to $Microsoft(MSFT.US) Azure.

Recently, investors have been frustrated by AWS's slightly slower growth compared to competitors.

But this is about to change...

5/ AWS cloud business growth is about to accelerate.

Anthropic's two gigawatt-scale AWS clusters have begun operations this quarter.

According to SemiAnalysis, this will drive AWS growth to around 25%.

If AWS can maintain an average annual growth rate of 20% over the next five years, with current annual revenue of $123 billion, AWS will generate $306 billion in revenue by 2030.

Assuming a net profit margin of 32%, Amazon could earn $100 billion in net profit from this business segment alone.

At a P/E ratio of 25x, this segment would be valued at over $2.5 trillion.

6/ $Amazon(AMZN.US)  e-commerce business is also growing.

Online retail and third-party seller services (combined) grew at an average annual rate of 9.75% between 2020 and 2024.

This segment will benefit from two major tailwinds: organic growth and margin expansion.

7/ Market research expects e-commerce sales to continue growing at low double-digit rates annually through 2027.

Even assuming $Amazon(AMZN.US) can maintain a 9% annual growth rate, this segment's revenue would reach about $675 billion.

With a net margin of 10% and a P/E ratio of 20x, this segment could be valued at $1.3 trillion.

8/ Advertising is another major growth driver for $Amazon(AMZN.US).

Since 2021, this segment has grown at nearly 22% annually.

The growth rate even surpasses the advertising businesses of $Alphabet(GOOGL.US) $Alphabet - C(GOOG.US) and $Meta Platforms(META.US), meaning $Amazon(AMZN.US) is taking market share from them.

Even maintaining just a 15% annual growth rate, the advertising segment could reach $130 billion in revenue by 2030.

Using mature advertiser $Meta Platforms(META.US)'s net margin of 35% as an example, $Amazon(AMZN.US)'s advertising business could contribute $45 billion in net profit.

At a P/E ratio of 25x, this would add another $1.1 trillion in valuation.

9/ Other businesses also generate significant revenue.

Subscription services, physical stores, and other services collectively generated $72 billion in revenue last year.

Assuming these businesses grow at 10% annually, they could generate another $130 billion in revenue in the future.

With an average net margin of 15%, this could contribute $19.5 billion in net profit.

At a P/E ratio of 20x, these businesses could be worth $390 billion.

10/ By 2030, $Amazon(AMZN.US)'s business valuations are as follows:

• AWS: $2.5 trillion
• E-commerce: $1.3 trillion
• Advertising: $1.1 trillion
• Other: $390 billion

Combined, $Amazon(AMZN.US) would reach a market cap of $5.3 trillion.
Discounting back to present value at 10% annually, this equates to a $3.3 trillion market cap.
Current market cap is only $2.4 trillion, implying over 25% discount to fair valuation.

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Investing from Zero (Andy)
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