Amazon is currently undervalued; fundamentals are accelerating and AI demand remains strong, supporting a fair value above $300 today and approximately $500 by 2028.

Now, the last stock I want to talk about in today's video, because it's one I've been buying recently, is Amazon.

But I added more Amazon stock to my portfolio on Friday, which is actually when I'm recording this video, because I still believe Amazon is undervalued .

I think Amazon's stock price should be above $300 right now because this company is operating at full capacity in every aspect. It's one of the companies that I think will clearly benefit from artificial intelligence, and given its earnings reports that keep coming out, I do n't understand why this stock seems to be under pressure.

It seems like the market is putting pressure on it while its fundamentals are accelerating and doubling very well .

And I know Amazon is well-known . It's one of the largest companies in the world, but I truly believe you don't have to be a genius to see Amazon is currently undervalued and could generate annual returns of over 20% if the company continues its strong performance.

Simply put, I believe Amazon is one of the best investments in the market right now, at least in my opinion. It's a dominant company with a strong competitive advantage and many positive factors at play, and its current price doesn't reflect that at all, leading to what I consider an excellent position for the next five years.

So, I have some new information I want to share with you about Amazon's business, given some recent news.

This first screenshot shows that AWS is raising the prices of its GPUs by 15%. AWS has also stated that it's doing this because the demand for computing still significantly outstrips the supply.

I think this bodes well for AWS's continued growth in the coming years and indicates that the demand for AI remains very strong.

Now, another recent piece of news is that Amazon is considering selling chips off its balance sheet and then leasing them back to the new owner. Some say this means Amazon is trying to improve its balance sheet, or that it indicates a surplus in The claim that chips and AI demand are slowing down is false .

In my opinion, this is the exact opposite of what it suggests .

If you've ever worked in real estate, you know what a "sale and leaseback" is, and that's precisely what Amazon is doing with its chips and GPUs. A sale and leaseback is when a company sells an asset to raise cash and then leases that asset back from the new owner to continue using it.

This gives the company more cash to invest while retaining access to the asset. Simply put, it's a way for Amazon to raise more cash while maintaining access to its GPUs.

Meanwhile , it was recently reported that the CEO of AWS stated that Amazon is considering building over 100 data centers across the United States. The company has also committed $200 billion to capital expenditures, so it clearly needs cash to build its AI infrastructure.

This is the likely reason Amazon is doing leaseback deals: to ensure it continues to have access to computing resources while funding its ongoing AI expansion.

So, in my opinion, Amazon is doing these leasebacks because demand is so high, not because demand is slowing down. Low.

This morning, the CEO of AWS stated in an interview that AWS's exposure to advanced AI models is less than a single percentage point . This is very good, in my opinion, because it means that AWS's revenue and cash flow are not at great risk if those models fail or don't meet their obligations .

He also mentioned that most of AWS's use comes from core computing, storage, and inference, not training, which is what advanced model companies focus on to push the boundaries of AI.

This ultimately means that AWS's revenue is very diversified and stable , and I think this is one of the reasons why Amazon's stock rose again on Friday.

Furthermore, analysts expect AWS to generate $177 billion in revenue this year, representing 37% growth , then 40% in 2027, and 35% in 2028. This means that AWS revenue could more than double by 2028 to reach $334 billion.

If this happens, Amazon's cash flow will continue to grow very rapidly . Now you can understand why the company invests such huge sums in capital expenditures.

Let's take a quick look at Amazon's price-to-operating cash flow (OPF) ratio , which I consider the best metric for valuing a stock. Today, Amazon's OPF ratio is 17.54. Looking at its history, you can clearly see that this level is at the lower end of Amazon's historical trading range, leading me to believe that the stock is still cheap today because its price-to-earnings ratio is still significantly lower than its historical averages.

This is happening at a time when Amazon's cash flows are accelerating and its profit margins are reaching record highs, leading me to believe that it should be trading at a higher multiple, not a lower one.

Now, let's switch to StockUnlock's Discounted Cash Flow (DCF) tool and load my Amazon model . In my DCF model, I expect Amazon's operating cash flows to grow by 20% annually over the next three years, and for Amazon to return to an OPF ratio of 20.

Now, if we look at Amazon's long-term historical average, we see that it has been trading at a price-to-cash flow multiple of An operating price-to-cash-flow (OPF) ratio of 20 is still significantly lower than Amazon's historical averages and doesn't represent a substantial expansion in multiples over the next three years.

Furthermore, given the rapid growth of Amazon Web Services (AWS) and the acceleration of all other Amazon business segments, I believe a 20% CAGR in OCF would be a conservative estimate.

In other words, I believe this is a conservative discounted cash flow (DCF) valuation for Amazon right now, and even with these inputs, I'm getting a 23.5% CAGR over the next three years, a fair value of $371, and a futures share price of around $500 by 2028, representing an 88% total return over the next three years.

Again, I believe this is a conservative DCF valuation for Amazon, and even with these conservative metrics, I'm getting a CAGR exceeding 20% over the next three years. For all these reasons, I continued to buy more.

Amazon stock is now the second largest holding in my portfolio , representing over 13% of my total holdings. Again, I don't think you need to be a genius to see that Amazon is an easy opportunity in the market right now, and for some reason, the market is keeping this stock low for reasons I don't understand.

As long as the market continues to do this, I will continue to buy more Amazon stock and increase my stake.