The “Magnificent Seven” shares are experiencing heavy promoting because the Nasdaq bear market continues.
As of market shut on April 7, the Nasdaq Composite has fallen by 19% to this point this 12 months, falling additional into bear market territory.
Among the many worst-hit Nasdaq shares to this point in 2025 are the “Magnificent Seven,” every of which has posted damaging returns on the 12 months. Throughout risky instances like these, it may be exhausting for buyers to suppose rationally. In my eyes, a lot of the continuing sell-off is rooted extra in emotion than sound logic. Whereas I perceive fears associated to uncertainty, I feel some inventory costs have merely fallen too far.
Let’s discover why Amazon (AMZN 11.98%) appears like a no brainer alternative at its present worth level and assess how the corporate is positioned to navigate the present macroeconomic challenges.
Amazon inventory has grow to be too low-cost to disregard
Amazon is a difficult firm to worth for a wide range of causes.
First, the corporate’s internet earnings can exhibit notable fluctuations relying on the quarter. Some causes for this embody seasonality because it pertains to the core e-commerce section and macro elements equivalent to inflation, rates of interest, and the impacts these can have on customers and companies alike. As well as, internet earnings will not be actually a real indicator of Amazon’s profitability, given a few of the nuances beneath typically accepted accounting rules (GAAP).
Second, the price-to-sales (P/S) a number of is not fully useful when valuing Amazon. Whereas there are different large-scale on-line storefronts, Amazon is a gigantic operation that features streaming, promoting, synthetic intelligence (AI), grocery supply, and cloud computing. On condition that Amazon sources income from so many various avenues, it is exhausting to give you a radical record of comparable firms to benchmark towards.
For these causes, I like to take a look at Amazon on a cash-flow foundation and evaluate the corporate to … itself.
AMZN EV to CFO (Annual) information by YCharts. EV = enterprise worth. CFO = money movement from operations.
The chart above illustrates Amazon’s enterprise worth to money movement from operations (EV/CFO) during the last 20 years. One factor that stands out proper off the bat is that Amazon’s present EV/CFO of 19.6 is buying and selling at a reduction in comparison with the corporate’s long-run common of twenty-two.7. Nevertheless, one other factor that stands out to me is simply how a lot the corporate’s EV/CFO has compressed during the last a number of years.
Mentioned in another way, the final time Amazon traded at an EV/CFO of round 20 was someday after 2010 (between 2011 and 2012, based mostly on the developments above). This pattern means that Amazon inventory is buying and selling at its least expensive ranges in over a decade, based mostly on working money movement.
Picture Supply: Getty Photographs.
Purchase the dip and maintain on tight
I feel the most important issue influencing the Nasdaq sell-off proper now’s President Donald Trump’s new tariff insurance policies. I will concede that there are numerous unknowns about how these tariffs will shake out when it comes to commerce negotiations and relations with different nations. On the floor, I can perceive why a world enterprise equivalent to Amazon might look susceptible proper now.
However to me, these issues are far overblown. Whereas tariffs may result in greater costs for some items and providers, I are inclined to suppose that brick-and-mortar shops and smaller retailers will really feel outsized stress. Amazon has a possibility to make the most of these dynamics and make its e-commerce retailer (which is already recognized for its reasonably priced costs) extra interesting to the common client.
Simply check out the developments within the chart beneath. The gray shaded columns characterize U.S. recessions during the last 20 years. Even throughout instances of recession and financial uncertainty, Amazon has finished an unquestionably good job producing constant money movement during the last 20 years.
AMZN Money from Operations (Annual) information by YCharts.
I consider this makes the corporate’s discounted valuation all of the extra perplexing. It is these very earnings which have allowed Amazon to take a position past the core e-commerce enterprise and develop new services. It is as if buyers have not given Amazon a lot in the best way of credit score for evolving from a primarily on-line storefront 20 years in the past to the diversified behemoth it’s at present.
In my eyes, Amazon will not be solely buying and selling for a cut price but additionally stays in a robust place regardless of ongoing financial uncertainty. I feel now’s a profitable alternative for long-term buyers to purchase the dip in Amazon and put together to carry on tight.
John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Adam Spatacco has positions in Amazon. The Motley Idiot has positions in and recommends Amazon. The Motley Idiot has a disclosure coverage.
