Amazon.com Inc (NASDAQ:AMZN) Model

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    ​Model Tier: Tier 2, Consensus-based model. 
    Model Summary: This model breaks down Amazon’s results by the company’s primary segments: North America, International and Amazon Web Services (AWS). We use a quarter-over-quarter growth rate and historic seasonality to project future segment earnings.​​
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Amazon Model Approach

Revenue Modeling Approach: This model breaks down Amazon’s results by the company’s primary segments: North America, International and Amazon Web Services (AWS). We use a quarter-over-quarter growth rate and historic seasonality to project future segment revenue.

Expense Modeling Approach: To estimate Cost of Revenue we use forecasts of Gross Margin percentage, and use operating margins estimates by segment to back into the four primary operating expense line items: Fulfillment, Marketing, Technology & Content, and General & Administrative Expense. We use historic averages to estimate Interest & Other Income, and apply an effective tax rate to the future projected income to forecast the Provision for Income Tax.

Non-GAAP Adjustments: Non-GAAP adjustments for Amazon include Stock-Based Compensation (SBC) and Amortization of Intangibles. To project future period SBC we use a ratio of SBC-to-Revenue, and base our estimate of Amortization of Intangibles on a historic average. We allocate the non-GAAP adjustments to operating expenses based on the prior period allocation.

Share Count Forecast: To forecast the future share count we calculate the historic change in share count, and apply similar changes in future periods.

Valuation Approach: We utilize a market multiple based valuation approach, specifically a Price-Earnings Multiple which we apply to the Next Twelve Month consensus EPS estimate, on an exCash basis.

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