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Forbes
2 days ago
- Business
- Forbes
Time To Buy AMZN Stock?
A view of the Amazon warehouse in Pawlikowice, Poland on May 29, 2025. (Photo by Jakub ... More Porzycki/NurPhoto via Getty Images) Amazon (NASDAQ:AMZN) is really leaning into AI, recently announcing a massive $10 billion investment in new data centers in North Carolina. Like Google and Microsoft, Amazon has been a major player in the AI boom, spending a whopping $222 billion on capital expenditures since 2022. The stock has seen a nice jump lately, climbing 24% from around $167 on April 21 to $208 now. This rally seems to be fueled by the broader market's positive reaction to new trade deals and a pause on reciprocal tariffs between the U.S. and China. The probability of the U.S. economy going into a recession this year has also come down from 60% earlier to 40% now, according to J.P. Morgan Research. Given the change in overall market sentiment, you might be wondering if Amazon is still a smart investment after its recent climb. We believe it is. Even with the recent rally, Amazon shows strong operational growth and solid financial health, and its stock isn't overpriced. Our analysis dives deep into Amazon's investment potential by looking at its current valuation compared to its recent operating performance and overall financial health. We've assessed Amazon across key areas like Growth, Profitability, Financial Stability, and Downturn Resilience. Our findings show that Amazon has a strong operating performance and financial condition. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – RGTI Stock: What's Next After An 1,100% Rally? When we look at AMZN stock against the broader market, it seems pretty reasonable. Amazon's price-to-sales ratio is 3.4 times, which is pretty close to the S&P 500's 3.0 times. Its price-to-earnings (P/E) ratio of 33.3 times is higher than the market's 26.4 times, but its price-to-free cash flow ratio is 19.3 times, which is slightly better than the S&P 500's 20.5 times. This means Amazon is doing a good job generating cash compared to its price. Check out our dashboard on Amazon's Valuation Ratios for more details. This moderate valuation suggests that Amazon isn't really getting a premium for its growth potential right now. It's likely that those high capital expenditures we mentioned earlier have made some investors a bit nervous. While that higher P/E ratio signals that the market expects Amazon's earnings to keep growing, it also means the stock could be vulnerable if that growth slows down. However, it's worth noting that this 33x P/E is actually lower than Amazon's average P/E of 46x over the past two years. Amazon's revenue just keeps climbing, showing how good they are at expanding across all their different businesses. Over the last three years, their annual revenue has grown by an average of 11%, much better than the S&P 500's 5.5%. This strong performance continued in the past year, with revenues jumping 10.1% from $591 billion to $650 billion. Looking at their most recent quarterly results, things are still looking good. Revenues grew 8.6% to $156 billion compared to $143 billion in the same period last year. This consistent growth, whether we're looking at annual or quarterly numbers, really highlights how Amazon's diverse business model keeps them expanding, even as they get bigger and bigger. While Amazon's revenues are trending higher, its profitability tells a slightly different story, and it might explain why some investors are a bit hesitant. For instance, their operating margin is 11.0%, which is a bit lower than the S&P 500's average of 13.2%. This suggests they're facing some challenges in turning all that revenue into efficient operations. Similarly, Amazon's net income margin of 10.1% also lags behind the broader market's 11.6% average. However, Amazon's operating cash flow margin is 17.5%, actually beating the S&P 500's 14.9%. This means they're doing a great job at generating cash, even if their accounting profits seem lower. This difference often comes down to Amazon's huge investments in growth and infrastructure. These investments might hit the company's short-term profit margins, but they're setting it up for bigger growth down the road. Amazon's balance sheet is incredibly strong, giving them a really solid base to handle any economic bumps in the road. The company's debt-to-equity ratio is super low at just 6.1%, which is way better than the S&P 500's average of 19.9%. This conservative approach means Amazon has tons of financial wiggle room for big investments. They're also sitting on a good amount of cash. Cash and cash equivalents make up 14.7% of their total assets, slightly more than the broader market's 13.8%. With $95 billion in cash and $643 billion in total assets, Amazon has serious resources to chase new growth opportunities and ride out any tough times. Looking back at how Amazon's stock performed during past market downturns gives us some good insights. It shows they can be pretty resilient, but also quite volatile. During the COVID-19 pandemic in 2020, Amazon actually held up pretty well. Their stock only dropped 22.7% compared to the S&P 500's 33.9% plunge, and it bounced back to pre-crisis levels in just two months. However, things were a bit different during the 2022 inflation shock. Amazon's stock took a bigger hit, falling 56.1% while the market dropped 25.4%. It took almost two years for the stock to fully recover, which just goes to show how growth stocks can feel more pain when interest rates go up and valuations get squeezed. The 2008 financial crisis presented similar challenges, with Amazon declining 65.3% against the market's 56.8% drop, though it also recovered within two years. These patterns suggest that while Amazon tends to swing more during severe market stress, it typically has the underlying strength to bounce back over time. We believe Amazon is an attractive investment right now. It offers a good valuation combined with incredibly strong fundamentals and a solid financial position. The company is delivering double-digit revenue growth and boasts a fortress-like balance sheet. These strengths outweigh any minor concerns about profitability. Notably, Amazon's AWS segment is far more profitable, boasting estimated EBITDA margins of around 45% last year, than its other businesses, which have EBITDA margins under 15%. With AWS's contribution to the company's overall sales on the rise—up from 12% in 2021 to 17% last year—the overall profitability will also improve. Furthermore, with a proven ability to recover from downturns, Amazon provides an excellent entry point into the long-term growth trends of the ongoing AI boom. It's a strong addition for growth-oriented portfolios. Not too happy about the volatile nature of AMZN stock? The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Forbes
24-03-2025
- Business
- Forbes
Is The ‘Predatory' Property Tax An Instrument Of Oppression?
An aerial view of houses in Jersey City, United States on July 13, 2024. (Photo by Jakub ... More Porzycki/NurPhoto via Getty Images) We all know the ancient adage: An old tax is a good tax. From the policymaker's perspective, this old saw probably has some merit; old taxes are more certain and more predictable than most fancy fiscal innovations. As Leonard Burman of the Urban-Brookings Tax Policy Center once told Marketplace, 'it means that if the tax law survives long enough, we might just figure it out.' But from the taxpayer's perspective, old taxes can also be bad ones — sometimes very bad. That's been the case for local property taxes, according to Andrew Kahrl, a professor of history and African American studies at the University of Virginia. In his 2024 book, The Black Tax: 150 Years of Theft, Exploitation, and Dispossession in America, Kahrl offers a powerful indictment of property taxation, at least as it exists in the real world. If the property tax has merit in the abstract, it's much harder to defend in actual practice. In recent years, scholars across a range of disciplines have laid bare the levers of systemic racial inequality, especially around the subject of real estate. 'Housing policies and real estate industry practices,' Kahrl writes, have 'powered the growth of the white middle class and white household wealth-building in mid-twentieth-century America while simultaneously constraining Black mobility, deepening racial segregation, and subjecting Black Americans to numerous and devastating forms of economic predation and plunder.' Dorothy Brown has offered a similar indictment of the federal tax system, including its preferences for homeownership. Kahrl's contribution to this growing body of literature focuses on the local property tax. Using a range of novel sources, he explores the subject using a three-part analytical lens: how property taxes have been administered, how they have been enforced, and how the resulting tax revenue has been spent. And his conclusion is damning. 'From the late nineteenth century to today, local tax assessors have consistently overtaxed the lands and homes that Black people own and the neighborhoods where they live,' Kahrl writes. At the same time, political leaders have badly shortchanged Black property owners when it comes to spending. 'For all the taxes they have paid, Black Americans have struggled to receive anything close to their fair share of the public goods and services that local governments provided,' Kahrl asserts. Perhaps worst of all, local property taxes have been used as a weapon of fiscal depredation, separating Black Americans from their hard-earned property. 'When they failed to pay on time,' Kahrl writes, 'African Americans were — and continue to be — subjected to the harshest consequences and most predatory features of tax delinquency laws that, in most states, permit local governments to sell liens on tax-delinquent properties to private investors, who can then saddle delinquent taxpayers with crippling debts and, should they fail to pay, take their property.' Metal house key and chalk inscription lien. Tax liens figure prominently in Kahrl's story — no surprise, since they are central to the dispossession that forms the heart of his narrative. Indeed, Kahrl has inveighed against the practice of selling tax liens in a series of articles and op-eds drawing on his research. 'Earlier this year, the investment firm Alden Global Capital cut a check for $1.75 million to Cook County, Illinois, for the right to prey on some of its poorest and most disadvantaged residents,' he wrote last year in The American Prospect. 'In exchange for paying these properties' outstanding taxes, Alden Global Capital can charge an escalating rate of interest and attach fees to those debts. If the delinquent taxpayer fails to pay it all back within two years, they can claim ownership of the property.' The practice of selling tax liens is central to local finance in many areas of the country — and especially in some of its poorest cities. Cash-strapped governments — including many led by Black elected officials — need the revenue from tax lien sales to keep the wheels turning. Local governments have limited options when it comes to raising revenue. But the results can be devastating for taxpayers. The tax lien industry, Kahrl contends, is a 'fundamentally predatory enterprise' that 'utilizes the machinery of local tax enforcement to exploit the hardships and misfortunes of struggling homeowners, and extract their wealth and property.' Kahrl uses a range of aggregated data to make his case against local property taxes (or at least against the way those levies are often administered and enforced). But he also has an eye for humanizing anecdotes — a vital skill when trying to explain taxes to a nontechnical audience. The Black Tax tells the story of property taxation from a bottom-up perspective; while Kahrl doesn't neglect the sort of top-down view that shapes most historical work on policy formulation, he puts individual taxpayers at the center of his narrative. Indeed, the book begins with a series of telling anecdotes, the first focusing on Jean Wright, a homeowner in Roosevelt, New York, who bought a house in the late 1970s. Wright struggled to make the purchase — and then struggled even more to pay her tax bills. Wright bought the house for $50,000 but found herself also paying $200 every month in property taxes. 'From the day I bought this house I knew that my taxes were too high,' Wright said. Indeed, Kahrl notes, 'her annual tax bill was roughly the same as that of the typical owner of a $200,000 house in a wealthy white neighborhood in the same county.' Kahrl uses another anecdote to underscore the dangers of tax delinquency. In 1973 Annie Kennedy made a $2,000 down payment to secure a $10,000 mortgage on a house in Hempstead, Long Island, part of the region's 'Black Belt.' 'She continued to work into her seventies and paid off the mortgage,' Kahrl relates. 'But when she looked to sell the house in 1986, Kennedy learned that it was no longer hers.' Kahrl continues: 'Years earlier, she had failed to pay a $92.07 school tax bill. Kennedy never received any notices of the missing payment, but that didn't save her: the law required only that the county send out notices, not that they be received. Nassau County sold the debt to tax-lien investor Charles Solomon, who took ownership of her home for just $92. All those mortgage payments, she remarked, 'might as well [have been dumped] in a garbage pail.'' Kahrl's book is filled with similar anecdotes, some even more tragic. But his story doesn't focus solely on oppression and predation: It also puts a spotlight on resistance. 'Black Americans resisted exploitation, guarded against predation, fought for an equitable distribution of public goods and services, and fought to be recognized as taxpayers,' Kahrl writes. The structures of systemic inequality were powerful and resilient, but Black property owners continued to push back. 'In the midst of a crisis of Black land loss unfolding across the 1960s and 1970s South, organizations like South Carolina's Black Land Services and the region-wide Emergency Land Fund formed and devised strategies for combatting predatory land grabbing,' Kahrl writes. Similar organizations developed in northern cities, where Black Americans worked collectively 'to dismantle racist fiscal structures, secure a more equitable distribution of public expenditures, and rid lower-income and Black neighborhoods of predatory tax buyers.' Kahrl is determined to dismantle the myths and tropes that surround taxpaying in America. Perhaps the most powerful of these myths, at least in recent years, is the division of the population into two camps: Those who pay taxes and those who consume government services. 'From the moment Black people began making claims on the state, whites in power have responded by peddling the canard that Blacks paid little in taxes and, by implication, were undeserving of the rights, benefits, and protections of citizenship,' Kahrl asserts. This process of fiscal demonization began after the Civil War, when 'white elites deployed racist tropes of Blacks as 'freeloaders' to overthrow Reconstruction and build support for tax cuts for the wealthy, alongside funding cuts for public programs and social services.' Similar arguments shaped U.S. politics into the 20th century. In the 1940s, 1950s, and 1960s, champions of legal segregation resisted the Civil Rights Movement by invoking racialized claims about taxpaying; the persistent myth that Black people were underpaying became the basis for efforts 'to oppose equal access to public goods, services, and benefits, most especially public schools,' Kahrl writes. Later, well-organized antitax advocates 'stoked the perception that Black people paid no taxes and consumed the bulk of white taxpayers' dollars to gain political power.' Kahrl describes how, once in office, these same political leaders used the myth of Black tax slacking to defend cuts to spending and other measures that deepened inequality by disproportionately harming Black Americans. 'These myths have been toxic and corrosive to democracy,' Kahrl writes. 'And, as this history shows, they could not be further from the truth.' Property taxes have exacted a heavy toll on Black Americans. For a century and a half, African American property owners have been paying too much (thanks to distorted assessments and racialized real estate markets) and receiving too little (thanks to the inequitable distribution of public services). Worst of all, Black property owners have been progressively dispossessed. 'In the half-century following emancipation, African Americans managed to accumulate nearly 16 million acres of land across the South,' Kahrl writes. 'But as they did, local white tax administrators worked to make it more expensive to hold and easier to lose. Black disfranchisement gave local tax administrators free reign to treat Black people less as constituents to serve and more as subjects to exploit and punish.' Tax delinquencies were not the only weapon of dispossession, but they were an important one. 'For many of the owners of the over 11 million acres of land Black people lost in the twentieth century,' Kahrl writes, 'it was a tax bill that they could not pay that sealed their fate and opened the door for land speculators who flocked to local tax sales to profit at their expense.' The total loss (in 2023 dollars) from tax-based dispossession of Black property owners 'easily exceeds $300 billion' over the past 150 years, Kahrl estimates. Kahrl's book is filled with similar facts and figures. But The Black Tax is most effective when Kahrl puts the spotlight on individual taxpayers. 'Figures and estimates underscore the gravity of this history,' he writes. 'But they cannot adequately convey its meaning. Only the stories of people and places can.'
