Key Takeaways
- Investor Whitney Tilson said on Bloomberg Surveillance that he looks for quality companies whose earnings will double in five years, which takes about 15% growth a year.
- Consensus estimates have Amazon’s and Alphabet’s normalized EPS growing about 26% and 24% a year from 2026 to 2028, well ahead of that pace.
- Meta’s estimates are flat this year as spending weighs, then rise 16% in 2027 and 15% in 2028, right on the doubling pace.
- Free cash flow is the catch: Amazon’s is expected to stay negative until 2028, the year Janus Henderson’s Alison Porter expects capex to peak.
Bloomberg’s Tom Keene asked Whitney Tilson how he holds on to a stock like Amazon (AMZN) when there’s so much noise around it. Tilson has been investing for more than a quarter century, and his answer was simple.
He ignores the headlines and looks for “quality companies that I think their earnings will be double what they are today in five years, and those stocks are going up.”
That’s a well-timed bar to test this week. Meta Platforms (META) fell 7% on Oct. 22 after its third-quarter report, as investors balked at its spending plans. Alphabet (GOOG) reports after the close on Wednesday, Oct. 28, and Amazon after the close on Thursday, Oct. 29.
For companies this big, doubling earnings in five years takes about 15% growth a year. Wall Street’s estimates say all three can do it.
Amazon and Alphabet are ahead of schedule
The figures below are normalized EPS, which leaves out the big gains both Amazon and Alphabet have booked this year on their stakes in other companies.
Analysts expect Amazon’s normalized EPS to rise from $8.31 this year to $13.27 in 2028.
That’s about 26% a year, well above the 15% bar. If it keeps that pace one more year, Amazon would double this year’s earnings by 2029, two years early.
Alphabet’s estimates look a lot like Amazon’s, even after a quarter when it spent heavily. Consensus has its normalized EPS climbing from $11.89 this year to $18.16 in 2028.
That’s about 24% a year, which puts a double within reach by 2030.
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Meta is the closest call
Meta’s spending hits this year’s earnings harder. Analysts expect normalized EPS of $30.18 in 2026, barely above 2025’s $29.68.
But after that, consensus has it rising 16% in 2027 and 15% in 2028, right on the doubling pace. To reach about $60 by 2031, Meta has to keep growing about 14% a year after 2028. That’s a little slower than analysts expect for the next two years.
The cash comes later
Of course, all that spending is eating the cash. Alphabet’s free cash flow was negative $5.9 billion in its second quarter, the first time that’s happened.
Even so, the market seems to want more spending. As Charles Schwab’s Liz Ann Sonders put it on Bloomberg Surveillance ahead of this week’s reports: “I think an undershooting of CapEx would be a bigger negative story than reinforcing what are pretty healthy CapEx numbers.”
The question is when the cash comes back. On Bloomberg Tech, Janus Henderson portfolio manager Alison Porter said she expects a “free cash flow inflection point as CapEx actually peaks which is likely to be into 2028.”
Amazon’s estimates follow that timeline. Consensus has its free cash flow at negative $33.9 billion this year and negative $8.1 billion in 2027, then a $37.8 billion inflow in 2028.
All three can get there
Even with the spending, the estimates back Tilson’s bar for all three. Amazon and Alphabet are on track to double ahead of schedule, and Meta is right on the line once this year is behind it.
My take: Amazon gets there first, and negative free cash flow through 2027 is the price of building the capacity that drives those earnings. Meta needs the most to go right.
Of course, estimates can move. Google Cloud grew revenue 82% last quarter and Amazon Web Services grew 37%, and that’s where the spending is supposed to pay off. If cloud growth slows in this week’s reports while capex keeps climbing, the 2027 and 2028 numbers above will come down.
So what is Amazon stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
