Amazon's Operating Cash Flow Could Push AMZN Over $314 - What's the Best AMZN Play?

Amazon's Operating Cash Flow Could Push AMZN Over $314 - What's the Best AMZN Play?

Mark R. Hake, CFA

Mon, September 14, 2026 at 4:00 PM GMT+3 5 min read

• AMZN -2.02%

Amazon, Inc. (AMZN) strong revenue and operating cash flow forecasts could push AMZN above $314, up 22%. Two plays are to short out-of-the-money (OTM) puts or, for investors with limited capital, a vertical bull put credit spread. This article will describe AMZN's valuation and these two plays.

AMZN closed at $256.78 on Friday, Sept. 11, but it's been essentially trading flat since right after its earnings release on July 30. For example, on July 31, AMZN closed at $271.58, 5.8% above today's price.

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One Way to Value Amazon Stock

Investors have likely been concerned about Amazon's negative free cash flow (FCF) for the last 2 quarters due to heavy capex. However, investors should assume the rising capex eventually pays off.

As a result, a better way to value AMZN is to use its trailing operating cash flow (OCF) (i.e., before capex is deducted from cash flow) and OCF margins, which have been rising.

Then, after applying its average OCF margin to analysts' revenue forecasts and using a conservative multiple, AMZN stock is worth 17% more.

For example, last quarter Amazon reported its trailing 12-month (TTM) OCF and TTM sales, so we can calculate its TTM margins over the last 6 quarters:

Not only has its OCF growth outpaced revenue growth, but its OCF margins have risen as a result. We can assume that over the next 12 months (NTM), its average OCF margin will likely be about 21%.

So, applying this to analysts' revenue forecasts over the next two calendar years:

2026: $828.28b revenue (Seeking Alpha) x 0.21 = $173.94b OCF

2027: $946.70b revenue (Seeking Alpha) x 0.21 = $198.81b OCF

Average: $887.5b x 0.21 = $186.375b OCF over the next 12 months (NTM)

This is 15.4% above its Q2 TTM OCF of $161.4 billion, as seen above in the Amazon table.

As a result, it implies a higher valuation for AMZN stock over the next 12 months (NTM).

AMZN Price Targets

For example, let's assume the market values AMZN stock with a 5.5% yield on the OCF forecasts. (Right now, its TTM OCF yield is 5.83%, but with a higher OCF margin and higher OCF, the yield will likely improve.) That is the same as multiplying OCF by 18.2x (i.e., 1/0.055 = 18.18):

$186.4b OCF x 18.2 = $3,393 billion, or $3.393 trillion fair market value (FMV)

On Sept. 11, AMZN had a market capitalization of $2.77 trillion, according to Yahoo! Finance. So, its FMV is +22.5% higher:

$3.393 tr FMV / $2.77 tr = 1.225

and the price target (PT) for AMZN is:

$256.78 x 1.225 = $314.56 PT

Moreover, analysts agree. Yahoo! Finance's survey of 62 analysts is $328.17 per share, and Barchart's mean survey PT is $327.00, up 27.3%. Similarly, AnaChart, which averages more recent analyst write-ups, shows that 43 analysts have an average PT of $323.17, up 26%.

However, there's no guarantee AMZN will rise to these PTs any time soon. As a result, one conservative way to play the stock is to sell short out-of-the-money cash-secured puts.

That way, an investor can collect income while waiting to potentially buy into AMZN lower if it drops to the shorted put strike price.

Shorting OTM Cash-Secured AMZN Puts

For example, look at the Oct. 16 expiry period, one month away. It shows that the $240.00 put option strike price has a midpoint premium of $3.08. That means an investor who posts $24,000 in collateral with their brokerage firm can immediately collect $308 in their account.

This works out to an expected yield to expiration of 1.283% over the next month (i.e., $3.08/$240.00), assuming AMZN doesn't drop to $240.00 by expiration.

Moreover, even if that happens, after the account is assigned to use the $24k collateral to buy 100 shares, the net breakeven (B/E) purchase price is:

$240.00 - $3.08 = $236.92 B/E

That's 7.7% below Friday's close, so it provides a good potential upside, especially if AMZN hits the PTs above. Moreover, the investor can repeat this trade every month as the collateral is released by the brokerage firm. The expected return (ER) over 6 months is:

1.283% yield x 6 = 7.70%

However, some investors don't have $24K to invest in this short-put trade. One way around this, with higher risk, is to do a vertical put credit spread.

Put Credit Spread Play in AMZN

This play works like this: Short the $240 put to collect a $308 credit, but also buy the $214 put for a debit, for a net credit of $73. However, since the brokerage firm sees the spread they only charge $500 in collateral (i.e., $240 strike - $235 strike x 100).

Therefore, the total return, as long as AMZN stays over $240, by expiration, is:

$73 / $500 collateral = 14.6%

Since the $73 is collected immediately, the worst possible case, if AMZN drops to $235 or lower, is a loss of $427.00 (i.e., $500-$73). So the net expected return (ER) is:

$73/$427 max loss = 17.1%

That is a much higher return available by shorting OTM puts, and this ER, if repeated successfully over 3 months, could result in an ER of over 51%. That is much better than holding AMZN shares over a year.

However, the potential loss is much higher than shorting OTM puts and owning shares, albeit with much lower capital at risk. Nevertheless, it is a more efficient way for investors who want to scale their account with lower capital.

On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com