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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 229.12-0.2%Nov 26 3:59 PM EST
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To: Glenn D. Rudolph who wrote (47969)3/29/1999 7:40:00 PM
From: MoonBrother  Read Replies (1) of 164684
 
04:06pm EST 29-Mar-99 EVEREN Securities AMZN
AMZN: Announces entry into auction business, reiterate 2-1 rating (2/2)

Valuation

The following outlines our valuation methodology as of 1/27/99,
which is under review; changes in out-year EPS estimates are the
most likely to cause a change in valuation targets. Investors
have to look out two years or more to get an earnings-based
valuation for Amazon. Our approach is based on one commonly used
by venture capitalists who frequently have to forecast farther
into the future than is typical for a public company. We
forecast EPS in the year 2003, then try to arrive at a reasonable
multiple of projected EPS based on the projected returns and
growth seen in the forecast year. With these two numbers we
arrive at a forecast of the stock's price in 2002, based on the
following year (i.e. 2003) EPS estimates. An opportunity rate is
used to discount this price back in time to arrive at target
prices. Our EPS for the year 2003 is $1.77. Our calendar 2002
estimated multiple of 2003 estimated EPS is now 80. This yields
a year 2002 target price of $141. To compensate for the
fundamental risk involved in web retailing, we add 0.5% to the
EVEREN Market Matrix (EVR, $20 5/16)discount rate of 5.15% to
arrive at an opportunity rate of 5.65% which we use to discount
the price in 2002 of $141 back to mid-2000. This discounting of
the estimated price in year 2002 yields $120 for our 6-month
target price and $127 for our 18-month target which are currently
under review.
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