AMZN is significantly undervalued due to low multiples (PE ~20, PEG <1) relative to growth and moat; strong long-term bull thesis.

hey, today we are talking all about the mighty Amazon, ticker symbol AMZN, who in my opinion, you know, I just very strongly strongly feel that the market has almost like no clue about how to properly value this business and the stock here in 2026 and going into the future.

And so, uh, just so you know where I'm coming from on all of this, when you look at me, the type of investor that I am, well, I I am someone who for many years now has been greatly loading up on shares on Amazon, making Amazon really by far one of my largest holdings in my own portfolio, again, for many years now.

And I just really feel that the market is almost clueless at this point about all the underlying potential that this company holds long term and what the actual value is, what it should be for um for everything that Amazon has and what that should really be worth.

Now, for starters, if we just look at this stock price over the past five years, we can see that it is very clearly been heavily suppressed being up only less than 50% during that entire time.

Which, you know, if this was more of a boring, low growth type of company, then sure, any of us might be thrilled to collect 50% gains even during a big multi-year period like that.

But Amazon is one of the most red-hot onfire companies in the entire world.

I mean, in just the past year alone, they generated over three4ers of a trillion dollars in sales. And it was still up by double digits at 16% growth year-over-year. And sure, their profits, you know, may be much smaller by comparison at over 135 billion of net income, that's still more than most companies in the world will ever generate in sales alone.

And this was in profits for Amazon, and it nearly doubled in size year-over-year, too.

Well, the result of all of that incredible size and incredible dominance and even still huge growth for it, well, when you couple it with with the stock suppression, that's when you get an absurdly unbelievably cheap valuation.

In fact, their PE ratio of only around 20 is currently sitting at its lowest levels ever in history. I mean, here's a chart of their like historical averages. You can see that it was around 30 in the past year, 40 in the past three years, 45 in the past 5 years, and around 60 in the past 10 years.

In other words, the market would generally accept around triple today's valuation.

And when you look even further out into the future, their PEG ratio that actually factors in all of their upcoming future growth, it's still sitting at only less than one, which is close to 30% cheaper than the sector median.

Again, despite this being by far a market leader in several different areas, some of the most important, in fact, like cloud computing and online shopping and again, a PEG of only one is always considered a great value.

Amazon for Amazon to be anywhere near that is crazy. And for it to be again 30% lower than even the sector median is even more unbelievable.

Now, the bears would argue that the reason for this historically cheap valuation that we would never get for Amazon is because of the falling cash flows from AI, the heavy spending that they've been pouring into artificial intelligence like so many other tech giants do.

This year alone, for example, Amazon expects to dump another $220 billion into capex, which is more than most countries entire GDP, by the way. and Amazon is spending all of that in just one single year. So yeah, that is pretty freaking crazy.

But in my opinion, it is also more than justified. Now, first of all, if anyone can afford to even invest that much capital back into the business, it would be Amazon. And if there's anyone that should even be spending that heavily back into the business, it is also Amazon.

Because they're no longer just an online retail store. This is a widely diversified juggernaut that is looking to expand and dominate every market that they practically touch.

Now, Prime alone has now become almost like an essential utility for over hundreds of millions of households and now also streams shows and movies and these households now listen to music through it and they enjoy many other benefits too integrated into other parts of Amazon's business.

I mean, when you look at just what they've done in healthcare and pharma, they've spent billions to acquire pill pack and one medical to integrate tech powered primary care and health AI directly into the prime ecosystem.

Not to mention, you know, just drug distribution, and you can actually get your medications through Amazon now, too. You get certain benefits if you're a member. All kinds of things that just um um synchronize very well.

They also bought MGM for more content for for Prime Video. Um, they bought Zuks for autonomous mobility. They backed nuclear power plays like X Energy to power their tech infrastructure.

And even their crown jewels, speaking of Amazon Web Services, it continues to be on as fire as on fire as ever before, too. Last quarter, for example, was their fastest growth in 18 quarters at over 37% while profits surged by 64% too.

Now again, this is already the number one largest cloud provider in the entire world and yet it continues to grow at these incredibly high rates. In fact, they've said themselves that they can't even keep up with all of the insatiable demand that is out there for their AI services for for cloud for data center because they've literally got customers at this point lined up at the door begging for compute and cloud capacity.

Now, Anthropic alone, for example, just committed over a hundred billion dollars for AWS to actually train and run their their Frontier AI models on Amazon's own tranium chips, too.

By the way, that is yet another big reason to invest in Amazon because, you know, by building their own custom silicon, well, it's not only going to be much cheaper for Amazon than having to buy higher price third-party offerings, but they're also ensuring that customers can get everything they need in one place.

And by the way, their data centers will be even even uh more efficient because these chips are actually built specifically for AI. They're highly customized for uh Amazon's own AI data centers.

But now you're basically going to be able to get all of this cloud capacity that is also being powered by Amazon's own chips, too. And I just feel that that really greatly strengthens their moat even further than it already was because you can get everything in one place now.

So again, I just think that Wall Street is unable to see a lot of this value here for what it really is and what it means for the future. And a big part of it is because again, they're just so fixated on the now and the present.

But when you look back, let's say a decade from now, I think Amazon's business is going to be so incredibly dominant and their margins are going to start soaring too because the the focus will really shift over from growth and expansion topline to profitability.

Once you really start dominating like all the markets out there, you're really going to start focusing more on profitability.

And when investors see that, when they see the margins starting to rise, and when they see how incredibly cheap the valuation is, even more than it already is now, I think that's when they're really going to start to flood into the stock.

I think there's going to be a lot of FOMO, fear of missing out. I think it's going to cause a wave, a surge of investors flooding into Amazon. And that is what I think is going to finally start to drive up that valuation that again, it's just way too cheap.

There's no reason why Amazon should be trading anywhere near the sector, let alone below it. And I think once this transition happens in the future, what I'm really investing for for decades to come into the future, when all of these investors, all that money pours into Amazon, I think that's when that valuation really starts to get driven up.

And I think that's when you will actually truly have a more expensive Amazon stock.

I don't think Amazon stock has ever been expensive. I know everybody says it is. Everybody I've heard it for years. I've been a YouTuber for so many years. I've always had people leaving comments every time I talk about Amazon.

It's too expensive. It's too expensive. I don't think it's ever been expensive. I don't think Amazon has ever been expensive. I think it's always been incredibly cheap because people can't understand that what this business is actually worth and what their future potential is and how aggressively they expand into so many different areas and just take over them and dominate them. and they can't see that in the future that focus will eventually shift over to profitability.

But it doesn't have to right now. Right now it's all about growth. Right now it's all about dominance. That's all you got to worry about.

Okay. So, one of the So, talking a little bit about risk. I will just say though to be fair um to all the bears out there for Amazon is that you know if the broader market does eventually pull back on all of this AI spending then yeah we could absolutely get even lower prices maybe here in the short to medium term and that's probably going to be a concern among Wall Street that will always be around for the foreseeable future when talking about AI because you know if at any point when when it's you know whether it's actually caused by a recession or we have the so-called AI bubble bursting then yeah the broader market will correct down and Amazon is not going to likely be immune to any of that

but two things on this and this is again this is like the biggest bare case that that uh the biggest argument that any bears can even make on Amazon but two things on that my counterargument to it number one this would be felt marketwide anyway so I doubt investors would be singling out Amazon as their biggest loser who if anything would likely still hold up better than most riskier names in AI.

So, Amazon is not going to be your problem if like the entire market is falling.

But number two is that at least when it comes to to an AI bubble bursting, I'm not um trying to think of how to put this, but I I guess I would say that I I'm really starting to believe that that AI bubble bursting, it can happen, but I'm starting to feel like it might actually never take place.

Again, I'm not saying that it won't that it for sure can't. But when I look at what's going on with AI in the economy right now, I just fairly strongly believe that AI is becoming this transformational technology that really is going to revolutionize the entire world.

And as companies start to realize too that if they don't adopt AI themselves, they risk falling behind everyone else. Then I think that's going to continuously fuel the demand for AI.

And it's going to cause almost like a snowball effect where companies just keep spending more in order to compete. And as they become more competitive, the competition rises and they they're forced to keep spending even more.

And all of that just kind of continuously keeps feeding itself bigger and bigger. Again, I'm not saying that all of that can't one day collapse on itself. But I just think that it would need to be triggered by something greater than interest for AI suddenly disappearing, which I don't think is going to happen.

I think it would take maybe a greater recession, maybe a big war, maybe something, you know, just kind of more catastrophic that kind of drags everything down with it and then pulls Amazon down as well, rather than there being any type of Amazon specific risk tied to them alone that I've I just don't see in Amazon.

Like when I look at Amazon, when I look at their underlying business, when I look at the valuation, I think it's actually one of the safest, most well diversified names in tech really in the entire market.

And I also think that even when it comes to all of this enormous spending, I know it's controversial at the moment, but you know, that's what everyone is worried about with Amazon specifically.

I just think it's ultimately going to result in them taking over even more markets than you ever even thought possible, growing and expanding further and just attracting more customers that are going to rely on Amazon long-term rely on AWS.

Do you agree with my assessment? Do you own Amazon stock yourself or do you feel that it is actually overvalued in any particular way?