| Snowflake Score | |
|---|---|
| Valuation | 3/6 |
| Future Growth | 4/6 |
| Past Performance | 1/6 |
| Financial Health | 3/6 |
| Dividends | 0/6 |
AMZN Stock Overview
Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North America and internationally.
Amazon.com Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$114.33 |
| 52 Week High | US$188.65 |
| 52 Week Low | US$101.26 |
| Beta | 1.24 |
| 1 Month Change | -8.38% |
| 3 Month Change | -27.54% |
| 1 Year Change | -38.14% |
| 3 Year Change | 13.34% |
| 5 Year Change | 127.18% |
| Change since IPO | 116,663.35% |
Recent News & Updates
Amazon Investors Face Uncertainty
Management overspent on capacity during the pandemic and it is hard for investors to measure the significance of this. Amazon managers themselves don’t know the exact ROI for Subscription services and outside investors have an even murkier view. There were 1,608,000 full-time and part-time employees at Amazon as of December 31st while Alibaba only had a total of 254,941 employees through March 31st. Introduction My thesis is that Amazon (AMZN) investors face uncertainty as details are sparse with respect to the economics of disparate businesses. Looking at the Alibaba (BABA) 4Q22 release, we see the trailing-twelve-month (“TTM”) operating income by segment but Amazon doesn’t break things out the same way. We do see top line sales by segment at Amazon, but little is shared in the way of operating income apart from the AWS segment and a breakdown between North America and International. Opaque Numbers Amazon’s Subscription services segment has similarities to Alibaba’s Digital media and entertainment segment. This Alibaba segment had TTM negative operating income of RMB 7,019 million through March 2022 on revenue of RMB 32,272 million. Costco (COST) is at the other end of the extreme in this area as much of their overall profit comes from membership fees. I believe Amazon is much more like Alibaba than Costco in this area such that it subsidizes commerce sales as opposed to being a direct driver of operating income. Relative to Amazon and JD (JD), Alibaba has an asset-light model with respect to logistics. We see that Alibaba’s Cainiao logistics segment had TTM negative operating income of RMB 3,920 million through March 2022 on revenue of RMB 46,107 million. Amazon shows the overall fulfillment expense line in the income statement, but this is combined for first-party (“1P”) and third-party (“3P”) and they don’t break out fulfillment revenue. This fulfillment expense line jumped from $16.5 billion in 1Q21 to $20.3 billion in 1Q22. The cost of logistics at Amazon is very high and this makes it difficult to determine operating margins for the 1P and 3P segments. Valuation Overview Where the Money Is by Adam Seessel makes long-term non-GAAP operating margin estimates for Amazon’s segments. Seessel came up with 10% for 1P, 5% for physical stores, 0% for subscriptions, 25% for 3P and 50% for other/advertising. The book is packed with good information and these estimates are very helpful. My estimates are somewhat close to the estimates in the book, and both sets of estimates are vastly different from the current GAAP numbers. Viewed through a GAAP accrual lens, Amazon’s commerce numbers are uninspiring as we move down the income statement. Per the 1Q22 release, overall operating income decreased to $3.7 billion for 1Q22, compared with $8.9 billion for 1Q21. These numbers are much worse without the highly profitable AWS segment. In 1Q22, the $3.7 billion overall operating income consisted of $6.5 billion from AWS and negative $2.8 billion from everything else. In 1Q21, the overall $8.9 billion total operating income was $4.2 billion from AWS and $4.7 billion from the other segments. Of course, cash flow is what matters which is why Amazon presents the cash flow statement before the accrual-based income statement. Unfortunately, I don’t see a segment breakdown for cash flow which means it is hard to separate AWS from everything else. Overall operating cash flow was $(2.8) billion for 1Q22, down $7 billion from $4.2 billion in 1Q21. TTM OCF was $39.3 billion and CFO Olsavsky provided a breakdown of the TTM capex and finance leases in the 1Q22 call: First, as a reminder, we look at the combination of CapEx plus finance leases. Capital investments were $61 billion on the trailing 12-month period ended March 31. About 40% of that went to infrastructure, primarily supporting AWS but also supporting our sizable Consumer business. About 30% is fulfillment capacity, primarily fulfillment center warehouses. A little less than 25% is for transportation. So think of that as the middle and the last-mile capacity related to customer shipments. The remaining 5% or so is comprised of things like corporate space and physical stores. Commerce Valuation Taken together, Amazon’s 1P sales plus their physical store sales and 3P GMV are at about the same level as Walmart’s sales. In the quarter through April 2022, Walmart had net sales of $140.3 billion along with membership and other income of $1.3 billion for total revenues of $141.6 billion. Looking at Amazon’s quarter through March 2022, they had $51.1 billion in 1P sales plus $4.6 billion in physical stores sales and $25.3 billion in 3P sales. The 3P figure is just Amazon’s cut and 3P GMV is estimated to be about 3.75 times this amount or $95 billion. As such, Amazon had nearly $151 billion for 1P sales, physical stores sales and 3P GMV compared to Walmart’s $140.3 billion sales. Walmart’s market cap is about $336 billion based on the July 1st share price of $122.63 and the 2,741,150,050 shares outstanding as of June 1st. Walmart’s 10-Q through April 2022 shows long-term debt and lease obligations of $49,809 million such that their EV exceeds their market cap. As a sanity check, I like to think about Walmart’s market cap and enterprise value. Amazon’s commerce segments move about the same amount of volume as Walmart and they’re growing faster; they’re worth significantly more than Walmart when we include advertising in the mix. I believe Amazon’s long-term 1P operating margin is lower than Seessel’s 10% estimate, but he makes some valid points as to why the steady-state margin is higher than what we see on today’s income statements. As he says, Amazon has consistently said that their online retail margins should be 10% to 13% at maturity. Walmart’s margins are lower than this, but Seessel notes that Walmart has to spend troves of money maintaining over 10,000 physical stores. He notes that Walmart has to maintain over physical 10,000 stores. Seessel goes on to explain other ways in which Amazon 1P is advantaged over Walmart: Common sense told me that this segment’s margins should be at least equal to Walmart’s 6%. Several calculations seemed to back that up. Walmart’s depreciation expense, the proxy for how much it must spend to maintain its physical plant, amounts to 2% of its annual sales. Amazon has no physical customer traffic in its virtual store, so it was logical to assume that Amazon’s depreciation expense is de minimis by comparison. Moreover, because it operates online, Amazon does not have to worry about “shrink,” the euphemism retailers use for shoplifting. While Walmart works hard to minimize theft - those “greeters” aren’t at the door just to welcome you - last year Walmart lost roughly $5 billion to sticky fingers. This amounts to one percentage point of margin lost to shrink. If we assume that Amazon’s margins begin at Walmart’s 6%, and then we add two points of depreciation that Amazon doesn’t have to incur and one percentage point for shrink, Amazon’s online retail earnings power becomes 9% of sales. [Kindle Location: 1,927] Again, Amazon moves about $50 billion in 1P GMV and about $100 billion in 3P GMV every quarter. They don’t need physical stores for this but Supply Chain Dive shows that they require more distribution square footage than Walmart and Target combined. Here are the square foot totals: Amazon: 376 million active + 109.8 million future Walmart: 145.5 million active + 17.8 million future Target: 57.7 million active + 4.3 million future Nearly all of Amazon’s square footage is leased and it has climbed rapidly since 2019: Amazon properties (Author's spreadsheet) Image Source: Author’s spreadsheet A May WSJ article by @SebasAHerrera explains that Amazon has expanded their footprint above too quickly: The online retail giant is seeking to sublease a minimum of 10 million square feet of warehouse space and is also exploring options to end or renegotiate leases with outside warehouse owners, according to a person familiar with the matter. The article goes on to say that the amount of space vacated may be 2 to 3 times the number of 10 million square feet mentioned earlier. We can look at Walmart and Target’s operating margins to better understand the steady-state numbers for Amazon. Walmart has a lower operating margin than Target, but they turn inventory over faster. Looking at the 10-K filings for the fiscal year through January 2022, Walmart had inventory turnover of 8.5x or $429,000 million cost of sales/$50,730 million avg. industry while Target had inventory turnover of 6.1x or $74,963 million/$12,278 million. Unlike Walmart and Target who use last-in, first-out (“LIFO”) for U.S. inventory, Amazon uses first-in, first-out (“FIFO”). Also, Amazon seems to show these numbers on a company-wide basis as opposed to a 1P basis. For the fiscal years through January 2020, 2021 and 2022, Walmart had operating margins of 3.9% [$20.6 billion/$524 billion], 4% [$22.5 billion/$559.2 billion] and 4.5% [$25.9 billion/$572.8 billion], respectively. For the fiscal years through January 2020, 2021 and 2022, Target had operating margins of 6% [$4.7 billion/$78.1 billion], 6.9% [$6.5 billion/$93.6 billion] and 8.4% [$8.9 billion/$106 billion], respectively. Amazon has a model of moving inventory quickly like Walmart which often means low margins. However, Amazon doesn’t have to maintain physical stores and they don’t have shrinkage. On balance, I think Amazon’s 1P operating margin is higher than what we see from Walmart, but it is hard for me to see it being too high given all the investments they have to make in technology and logistics. They don’t just make growth investments in these areas; they have to invest heavily in these areas just to tread water and move the same volume. I think the steady-state operating margin for the 1P business is about 7%. Amazon 1P TTM sales through March 2022 were $220,303 million and the implied steady-state operating income is $15.4 billion if we use a 7% margin. Amazon’s 1P growth has slowed but it is remarkable what this segment has done since 2016. In 1Q22, Amazon 1P had sales of $51.1 billion while eBay had GMV of $19.4 billion. Meanwhile, Target had revenue of $25.2 billion through the April 2022 quarter. There was a time not long ago when these numbers were more tightly bound and in a different order. In 1Q16, Amazon 1P had sales of $19.9 billion while eBay’s GMV was $20.5 billion. Back then, Target had revenue of $16.2 billion through the April 2016 quarter. Given Amazon’s 1P growth, I think this business may be worth a higher multiple than what we see for Target or eBay. I think this segment is worth 10x the steady-state operating income which is a little over $150 billion Moving on to the 3P segment, Alibaba is a nice reference point. Bereft of Amazon’s asset-heavy fulfillment architecture, Alibaba has far fewer employees despite the fact that they move double the GMV. There were 1,608,000 full-time and part-time employees at Amazon as of December 31st while Alibaba only had a total of 254,941 employees through March 31st. The extent of wage inflation in the coming years isn’t clear right now but it could be substantial. Alibaba’s China commerce segment had operating margins of 39% and 29% for the fiscal years ending in March 2021 and March 2022, respectively. I think Adam Seessel’s estimate of 25% operating margins for Amazon 3P is a little ambitious given Amazon’s investments in the low-margin logistics business and the coming wage inflation. I think steady-state operating margins for this segment are about 20%. 3P TTM sales are $104,992 million so a steady-state operating income based on a 20% margin is $21 billion. I think this segment deserves a higher multiple than the 1P segment because it isn’t as asset-heavy. I believe a multiple of 14 or 15 times is in order such that this segment is worth about $295 to $315 billion. Seeing as 3P does about twice the dollar volume of 1P, it is reasonable for this segment to be worth twice as much as the $150 billion 1P figure mentioned earlier.
Amazon: 5 Amazing Business Segments To Keep The Company On Top Of The Game
Amazon is a company that owns 5 main business segments which are highly successful. Amazon is currently incurring high capital expenditure due to investments in cloud infrastructure and streaming contents which are expected to be temporary headwinds. Amazon is now significantly undervalued which presents itself as a great investment opportunity for long term investors.
Shareholder Returns
| AMZN | US Online Retail | US Market | |
|---|---|---|---|
| 7D | 5.0% | 3.9% | 0.7% |
| 1Y | -38.1% | -42.1% | -18.4% |
Return vs Industry: AMZN exceeded the US Online Retail industry which returned -41.6% over the past year.
Return vs Market: AMZN underperformed the US Market which returned -18.4% over the past year.
Price Volatility
| AMZN volatility | |
|---|---|
| AMZN Average Weekly Movement | 8.4% |
| Online Retail Industry Average Movement | 13.4% |
| Market Average Movement | 8.2% |
| 10% most volatile stocks in US Market | 16.9% |
| 10% least volatile stocks in US Market | 3.4% |
Stable Share Price: AMZN is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 8% a week.
Volatility Over Time: AMZN's weekly volatility (8%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1994 | 1,608,000 | Andy Jassy | https://www.amazon.com |
Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It sells merchandise and content purchased for resale from third-party sellers through physical and online stores.
Amazon.com Fundamentals Summary
| AMZN fundamental statistics | |
|---|---|
| Market Cap | US$1.15t |
| Earnings (TTM) | US$21.41b |
| Revenue (TTM) | US$477.75b |
54.3x
P/E Ratio2.4x
P/S RatioIs AMZN overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| AMZN income statement (TTM) | |
|---|---|
| Revenue | US$477.75b |
| Cost of Revenue | US$276.44b |
| Gross Profit | US$201.31b |
| Other Expenses | US$179.90b |
| Earnings | US$21.41b |
Last Reported Earnings
Mar 31, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 2.10 |
| Gross Margin | 42.14% |
| Net Profit Margin | 4.48% |
| Debt/Equity Ratio | 50.8% |
How did AMZN perform over the long term?
See historical performance and comparisonValuation
Is AMZN undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
3/6Valuation Score 3/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio
Key Valuation Metric
Which metric is best to use when looking at relative valuation for AMZN?
Other financial metrics that can be useful for relative valuation.
| What is AMZN's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$1.15t |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 2.6x |
| Enterprise Value/EBITDA | 22.2x |
| PEG Ratio | 1.2x |
Price to Earnings Ratio vs Peers
How does AMZN's PE Ratio compare to its peers?
| AMZN PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 26.2x | ||
BABA Alibaba Group Holding | 34.5x | 18.1% | US$318.6b |
AAPL Apple | 22.7x | 3.5% | US$2.3t |
GOOGL Alphabet | 20.2x | 14.2% | US$1.5t |
MSFT Microsoft | 27.5x | 12.0% | US$2.0t |
AMZN Amazon.com | 54.3x | 45.4% | US$1.2t |
Price-To-Earnings vs Peers: AMZN is expensive based on its Price-To-Earnings Ratio (54.3x) compared to the peer average (26.2x).
Price to Earnings Ratio vs Industry
How does AMZN's PE Ratio compare vs other companies in the US Online Retail Industry?
Price-To-Earnings vs Industry: AMZN is expensive based on its Price-To-Earnings Ratio (54.3x) compared to the US Online Retail industry average (16.1x)
Price to Earnings Ratio vs Fair Ratio
What is AMZN's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 54.3x |
| Fair PE Ratio | 60.1x |
Price-To-Earnings vs Fair Ratio: AMZN is good value based on its Price-To-Earnings Ratio (54.3x) compared to the estimated Fair Price-To-Earnings Ratio (60.1x).
Share Price vs Fair Value
What is the Fair Price of AMZN when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: AMZN ($114.33) is trading below our estimate of fair value ($280.99)
Significantly Below Fair Value: AMZN is trading below fair value by more than 20%.
Price to Earnings Growth Ratio
PEG Ratio: AMZN is poor value based on its PEG Ratio (1.2x)
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Future Growth
How is Amazon.com forecast to perform in the next 1 to 3 years based on estimates from 47 analysts?
Future Growth Score
4/6Future Growth Score 4/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
45.4%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: AMZN's forecast earnings growth (45.4% per year) is above the savings rate (1.9%).
Earnings vs Market: AMZN's earnings (45.4% per year) are forecast to grow faster than the US market (13% per year).
High Growth Earnings: AMZN's earnings are expected to grow significantly over the next 3 years.
Revenue vs Market: AMZN's revenue (13.6% per year) is forecast to grow faster than the US market (7.9% per year).
High Growth Revenue: AMZN's revenue (13.6% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: AMZN's Return on Equity is forecast to be low in 3 years time (14.7%).
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Past Performance
How has Amazon.com performed over the past 5 years?
Past Performance Score
1/6Past Performance Score 1/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
42.2%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: AMZN has a high level of non-cash earnings.
Growing Profit Margin: AMZN's current net profit margins (4.5%) are lower than last year (6.4%).
Past Earnings Growth Analysis
Earnings Trend: AMZN's earnings have grown significantly by 42.2% per year over the past 5 years.
Accelerating Growth: AMZN's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.
Earnings vs Industry: AMZN had negative earnings growth (-20.4%) over the past year, making it difficult to compare to the Online Retail industry average (-18.3%).
Return on Equity
High ROE: AMZN's Return on Equity (16%) is considered low.
Discover strong past performing companies
Financial Health
How is Amazon.com's financial position?
Financial Health Score
3/6Financial Health Score 3/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: AMZN's short term assets ($133.9B) do not cover its short term liabilities ($139.5B).
Long Term Liabilities: AMZN's short term assets ($133.9B) do not cover its long term liabilities ($137.3B).
Debt to Equity History and Analysis
Debt Level: AMZN's net debt to equity ratio (1.2%) is considered satisfactory.
Reducing Debt: AMZN's debt to equity ratio has increased from 40.3% to 50.8% over the past 5 years.
Debt Coverage: AMZN's debt is well covered by operating cash flow (57.8%).
Interest Coverage: AMZN's interest payments on its debt are well covered by EBIT (13.9x coverage).
Balance Sheet
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Dividend
What is Amazon.com current dividend yield, its reliability and sustainability?
Dividend Score
0/6Dividend Score 0/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
Dividend Yield vs Market
Notable Dividend: Unable to evaluate AMZN's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.
High Dividend: Unable to evaluate AMZN's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.
Stability and Growth of Payments
Stable Dividend: Insufficient data to determine if AMZN's dividends per share have been stable in the past.
Growing Dividend: Insufficient data to determine if AMZN's dividend payments have been increasing.
Earnings Payout to Shareholders
Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: Unable to calculate sustainability of dividends as AMZN has not reported any payouts.
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Management
How experienced are the management team and are they aligned to shareholders interests?
6.8yrs
Average management tenure
CEO
Andy Jassy (54 yo)
1
Tenure
US$212,701,169
Compensation
Mr. Andrew R. Jassy, also known as Andy, has been President, Chief Executive Officer and Director at Amazon.com, Inc. since July 5, 2021. He served as Chief Executive Officer of Amazon Web Services Inc. at...
CEO Compensation Analysis
Compensation vs Market: Andy's total compensation ($USD212.70M) is above average for companies of similar size in the US market ($USD13.41M).
Compensation vs Earnings: Andy's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.
Leadership Team
Experienced Management: AMZN's management team is seasoned and experienced (6.8 years average tenure).
Board Members
Experienced Board: AMZN's board of directors are considered experienced (6.4 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.
Ownership Breakdown
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
Top Shareholders
Company Information
Amazon.com, Inc.'s employee growth, exchange listings and data sources
Key Information
- Name: Amazon.com, Inc.
- Ticker: AMZN
- Exchange: NasdaqGS
- Founded: 1994
- Industry: Internet and Direct Marketing Retail
- Sector: Retail
- Implied Market Cap: US$1.155t
- Shares outstanding: 10.17b
- Website: https://www.amazon.com
Number of Employees
Location
- Amazon.com, Inc.
- 410 Terry Avenue North
- Seattle
- Washington
- 98109-5210
- United States
Listings
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/07/06 00:00 |
| End of Day Share Price | 2022/07/06 00:00 |
| Earnings | 2022/03/31 |
| Annual Earnings | 2021/12/31 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.