Investment Analysis of Amazon: Valuation, Regression Models, Risk Assessment, and Strategic Hedging
Year: 2024
Type: article
Abstract: In contemporary quantitative finance, accurately valuing large-cap growth stocks with great momentum, like Amazon, is crucial for portfolio optimization and risk management in a market mainly consisting of mega-cap stocks. This paper analyzes Amazon's investment potential, focusing on valuation, risk, and hedging strategies. Using the Free Cash Flow to the Firm (FCFF) and Capital Asset Pricing Model (CAPM), we estimate a 16% upside in Amazon's share price, reflecting strong growth potential. Regression analysis shows significant links between its stock and key economic indicators, while a Value at Risk (VaR) of 2.71% indicates lower risk than peers. The model suggests using 24 put option contracts per 100 shares to manage downside risk. This research provides investors with quantitative insights into Amazon’s financial outlook, emphasizing its attractiveness as a resilient growth stock for a moderate long-term portfolio.
Authors: Shengsheng Jin, Chengyu Qi, Huining Xie
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4406035703