Investors continue to view Amazon.com (NASDAQ:AMZN) stock as an attractive investment, driven by its robust free cash flow (FCF). Despite the upcoming release of Q4 results on Feb. 1, analysts maintain a positive outlook, projecting earnings of 79 cents per share for the quarter. This forecast suggests another quarter of positive results and a positive trailing 12 months for free cash flow.
One notable metric supporting the bullish sentiment is the nearly 4% FCF margin generated in the last 12 months ($21.4 billion in FCF / $554 billion in sales = 3.8%). Based on analysts’ sales estimates of $636.69 billion for 2024, this implies a projected FCF of $25.5 billion for the year.
Using a 1.333% FCF yield metric, equivalent to a 75x FCF multiple typical for technology stocks, a market cap projection of $1,912 billion within the next 12 months is derived. This represents a substantial increase of 19.5% over the current market cap of $1,600 billion, potentially pushing the stock to around $185.
Analysts’ assessments further support the positive outlook, with Refinitiv’s survey indicating an average price target of $182.45 per share, approximately 18% higher than the current price. AnaChart.com’s analysis, tracking 47 analysts, suggests an even more optimistic average target of $187.93 per share, with the highest target reaching $230.00.
For existing shareholders seeking income opportunities, selling short out-of-the-money (OTM) put options is a suggested strategy. A previous successful short sale involved shorting the $146 strike price puts when the stock was at $151.94, resulting in a 3.9% OTM play and a put yield of 0.774%.
This short-put strategy can be repeated, exemplified by the current option of the Feb. 16 expiration puts at the $148 strike price, trading at $3.05 per contract. With a 4% OTM position, the short-put trader can achieve an immediate yield of over 2%.
Considering the potential for repeating this strategy every 24 days for a year (15 times), the annualized expected return (ER) exceeds 30%. This income play proves attractive for existing AMZN stock investors, especially in the absence of dividends from Amazon’s free cash flow. With higher price targets for AMZN stock, the prospect of additional income through shorting OTM puts remains appealing to existing investors.
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Author Faith Yakubu 
