Editing Amazon.com, Inc.
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Amazon's mission is to be the most customer-centric company, the best employer, and the safest workplace on Earth. | |||
The company prioritises customer satisfaction and employee well-being, guided by principles such as customer obsession, passion for invention, operational excellence, and long-term thinking. Amazon operates in various segments, including e-commerce, cloud computing services (Amazon Web Services), digital content, logistics and delivery, smart home devices, grocery and food delivery, healthcare, entertainment and media, advertising, and consumer electronics. | The company prioritises customer satisfaction and employee well-being, guided by principles such as customer obsession, passion for invention, operational excellence, and long-term thinking. Amazon operates in various segments, including e-commerce, cloud computing services (Amazon Web Services), digital content, logistics and delivery, smart home devices, grocery and food delivery, healthcare, entertainment and media, advertising, and consumer electronics. | ||
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Through its dedicated cloud computing platform, Amazon Web Services (AWS), Amazon offers a range of services to businesses and individuals, including: | Through its dedicated cloud computing platform, Amazon Web Services (AWS), Amazon offers a range of services to businesses and individuals, including: | ||
# | # Infrastructure as a Service (IaaS): This service allows users to access virtual servers, storage, and networking capabilities, eliminating the need for physical hardware. | ||
# | # Platform as a Service (PaaS): This service provides users with the ability to develop applications using pre-configured platform templates. | ||
# | # Software as a Service (SaaS): This service enables users to utilize specific applications without the need for outright purchase or installation. | ||
=== Digital Content === | === Digital Content === | ||
Amazon provides an extensive array of digital content platforms tailored to cater to a range of interests: | Amazon provides an extensive array of digital content platforms tailored to cater to a range of interests: | ||
# | # Amazon Prime Video: A streaming service featuring an expansive library of movies and TV shows, offering both popular hits and Amazon's original productions. | ||
# | # Amazon Music: A platform catering to music enthusiasts, streaming a diverse selection of songs across various genres. | ||
# | # Kindle: A dedicated platform for book lovers, delivering a vast collection of e-books spanning numerous categories, from contemporary fiction to academic texts. | ||
=== Logistics and Delivery === | === Logistics and Delivery === | ||
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=== E-commerce Retail === | === E-commerce Retail === | ||
Amazon's core business lies in e-commerce retail, encompassing the sales of a diverse array of consumer goods via its eponymous online platform. This includes a vast assortment of items such as electronics, books, clothing, and home goods. In 2022, Amazon's online storefronts achieved an impressive revenue of $220 billion | Amazon's core business lies in e-commerce retail, encompassing the sales of a diverse array of consumer goods via its eponymous online platform. This includes a vast assortment of items such as electronics, books, clothing, and home goods. In 2022, Amazon's online storefronts achieved an impressive revenue of $220 billion. <!-- The word 'impressive' is a relative term. Impressive how? --> | ||
=== Physical stores === | === Physical stores === | ||
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|150 mln sq ft | |150 mln sq ft | ||
|} | |} | ||
=== Smart speaker market share (2020) === | === Smart speaker market share (2020) === | ||
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Educated at Princeton University, Bezos graduated with honours in electrical engineering and computer science. He was named TIME Magazine's Person of the Year in 1999. | Educated at Princeton University, Bezos graduated with honours in electrical engineering and computer science. He was named TIME Magazine's Person of the Year in 1999. | ||
==== Chief Executive Officer ==== | ==== Chief Executive Officer ==== | ||
[[File:Image111111111111.png|left|thumb]]Andy Jassy, the CEO of Amazon, is a visionary leader whose exceptional expertise and strategic acumen have played a pivotal role in shaping the company's success. With an impressive tenure at Amazon, Jassy has demonstrated unwavering commitment to innovation and customer-centricity, driving Amazon's transformation into a global tech giant. Known for his sharp intellect, Jassy possesses a deep understanding of the evolving technology landscape and has been instrumental in the growth of Amazon Web Services (AWS), Amazon's cloud computing division. His visionary leadership and ability to navigate complex challenges have garnered admiration, as he consistently fosters a culture of relentless innovation and high standards. Under Jassy's guidance, Amazon continues to expand its reach and redefine the boundaries of what is possible, making him a respected and influential figure in the tech industry. | [[File:Image111111111111.png|left|thumb]]Andy Jassy, the CEO of Amazon, is a visionary leader whose exceptional expertise and strategic acumen have played a pivotal role in shaping the company's success. With an impressive tenure at Amazon, Jassy has demonstrated unwavering commitment to innovation and customer-centricity, driving Amazon's transformation into a global tech giant. Known for his sharp intellect, Jassy possesses a deep understanding of the evolving technology landscape and has been instrumental in the growth of Amazon Web Services (AWS), Amazon's cloud computing division. His visionary leadership and ability to navigate complex challenges have garnered admiration, as he consistently fosters a culture of relentless innovation and high standards. Under Jassy's guidance, Amazon continues to expand its reach and redefine the boundaries of what is possible, making him a respected and influential figure in the tech industry. | ||
==== Senior Vice President and Chief Financial Officer ==== | ==== Senior Vice President and Chief Financial Officer ==== | ||
[[File:Image12213.png|left|thumb]]Brian T. Olsavsky joined Amazon.com in April 2002. As CFO of Amazon.com, he oversees the company's overall financial activities, including controllership, tax, treasury, analysis, investor relations, internal audit and financial operations. Prior to becoming Senior Vice President and CFO in June 2015, he served as Vice President, Finance and CFO for the Global Consumer Business. In his role as Vice President, Finance and CFO for the Global Consumer Business, Mr. Olsavsky had oversight and responsibility for the finance team supporting Amazon.com websites, merchant services, and fulfillment operations and subsidiaries. From 2007 to 2010, Mr. Olsavsky was Vice President, Finance for Amazon's North America retail business unit and acquisitions, and from 2002 to 2007 Mr. Olsavsky led the finance departments for Amazon's Worldwide Operations organization. Prior to joining Amazon.com, Mr. Olsavsky spent seven years at Fisher Scientific, where he held a variety of financial and business management roles, and a total of eight years at BF Goodrich and Union Carbide, where he held a variety of financial and operational roles. Mr. Olsavsky received a BS in Mechanical Engineering from Penn State and an MBA in Finance from Carnegie Mellon University. | [[File:Image12213.png|left|thumb]]Brian T. Olsavsky joined Amazon.com in April 2002. As CFO of Amazon.com, he oversees the company's overall financial activities, including controllership, tax, treasury, analysis, investor relations, internal audit and financial operations. Prior to becoming Senior Vice President and CFO in June 2015, he served as Vice President, Finance and CFO for the Global Consumer Business. In his role as Vice President, Finance and CFO for the Global Consumer Business, Mr. Olsavsky had oversight and responsibility for the finance team supporting Amazon.com websites, merchant services, and fulfillment operations and subsidiaries. From 2007 to 2010, Mr. Olsavsky was Vice President, Finance for Amazon's North America retail business unit and acquisitions, and from 2002 to 2007 Mr. Olsavsky led the finance departments for Amazon's Worldwide Operations organization. Prior to joining Amazon.com, Mr. Olsavsky spent seven years at Fisher Scientific, where he held a variety of financial and business management roles, and a total of eight years at BF Goodrich and Union Carbide, where he held a variety of financial and operational roles. Mr. Olsavsky received a BS in Mechanical Engineering from Penn State and an MBA in Finance from Carnegie Mellon University. | ||
==== Chief Executive Officer, Worldwide Amazon Stores ==== | ==== Chief Executive Officer, Worldwide Amazon Stores ==== | ||
[[File:Image34.png|left|thumb]] | [[File:Image34.png|left|thumb]] | ||
Douglas J. Herrington has served as CEO of Worldwide Amazon Stores since July 2022. In this role, he leads numerous businesses, including Amazon’s online and mobile shopping experiences worldwide, global operations and fulfillment, Prime, Amazon Grocery, Amazon Business, Selling Partner Services, and Amazon Health Services. He joined Amazon in 2005 to launch the Amazon consumables business and was named senior vice president of North America Consumer in 2015. Doug is passionate about building and innovating. He led teams that invented services such as Subscribe and Save, Amazon Fresh, Amazon Business, Alexa Shopping, and Buy with Prime. Before joining Amazon, he was the founder and CEO of KeepMedia and previously served on the executive team at online grocery retailer Webvan. Doug received a BA in economics from Princeton University and holds an MBA from Harvard Business School. | Douglas J. Herrington has served as CEO of Worldwide Amazon Stores since July 2022. In this role, he leads numerous businesses, including Amazon’s online and mobile shopping experiences worldwide, global operations and fulfillment, Prime, Amazon Grocery, Amazon Business, Selling Partner Services, and Amazon Health Services. He joined Amazon in 2005 to launch the Amazon consumables business and was named senior vice president of North America Consumer in 2015. Doug is passionate about building and innovating. He led teams that invented services such as Subscribe and Save, Amazon Fresh, Amazon Business, Alexa Shopping, and Buy with Prime. Before joining Amazon, he was the founder and CEO of KeepMedia and previously served on the executive team at online grocery retailer Webvan. Doug received a BA in economics from Princeton University and holds an MBA from Harvard Business School. | ||
==== Vice President, Worldwide Controller ==== | ==== Vice President, Worldwide Controller ==== | ||
[[File:Image44444.png|left|thumb]] | [[File:Image44444.png|left|thumb]] | ||
Shelley L. Reynolds joined Amazon in February 2006 as Vice President of Finance and Controller. In April 2007, she was promoted to Vice President, Worldwide Controller and Principal Accounting Officer. In her role, she oversees Amazon’s accounting function, leading the team that touches every geography in which the company operates. Prior to joining Amazon, Ms. Reynolds spent 19 years at Deloitte & Touche LLP, serving as partner from 1998 to 2006. At Deloitte, Ms. Reynolds specialized in matters related to mergers & acquisitions and the Securities and Exchange Commission, serving multiple publicly traded multi-national corporations from a broad range of industries. Ms. Reynolds received her undergraduate degree from the University of Washington Foster School of Business, where she currently serves on the advisory board. | Shelley L. Reynolds joined Amazon in February 2006 as Vice President of Finance and Controller. In April 2007, she was promoted to Vice President, Worldwide Controller and Principal Accounting Officer. In her role, she oversees Amazon’s accounting function, leading the team that touches every geography in which the company operates. Prior to joining Amazon, Ms. Reynolds spent 19 years at Deloitte & Touche LLP, serving as partner from 1998 to 2006. At Deloitte, Ms. Reynolds specialized in matters related to mergers & acquisitions and the Securities and Exchange Commission, serving multiple publicly traded multi-national corporations from a broad range of industries. Ms. Reynolds received her undergraduate degree from the University of Washington Foster School of Business, where she currently serves on the advisory board. | ||
==== Chief Executive Officer, Amazon Web Services ==== | ==== Chief Executive Officer, Amazon Web Services ==== | ||
[[File:Image5555.png|left|thumb]]Adam N. Selipsky is the CEO of Amazon Web Services (AWS), the world’s most comprehensive and broadly adopted cloud. He also leads Worldwide Sustainability for Amazon, overseeing efforts to scale and drive Amazon’s adoption of renewable energy, path to net-zero carbon emissions, and other company-wide initiatives. Having previously led AWS Marketing, Sales, and Support from its infancy, Selipsky was instrumental in launching and growing AWS from a startup into a multi-billion-dollar business. In 2016, Selipsky left to become president and CEO of data visualization pioneer Tableau Software, where he led the company through its acquisition by Salesforce in what was the third-largest software industry acquisition at the time, before returning to AWS in 2021. Selipsky is a member of the World Economic Forum Information, Technology, and Communications governors, and serves on the Harvard Business School Dean’s Advisory Board. He has an AB in government from Harvard University and an MBA from Harvard Business School. | [[File:Image5555.png|left|thumb]]Adam N. Selipsky is the CEO of Amazon Web Services (AWS), the world’s most comprehensive and broadly adopted cloud. He also leads Worldwide Sustainability for Amazon, overseeing efforts to scale and drive Amazon’s adoption of renewable energy, path to net-zero carbon emissions, and other company-wide initiatives. Having previously led AWS Marketing, Sales, and Support from its infancy, Selipsky was instrumental in launching and growing AWS from a startup into a multi-billion-dollar business. In 2016, Selipsky left to become president and CEO of data visualization pioneer Tableau Software, where he led the company through its acquisition by Salesforce in what was the third-largest software industry acquisition at the time, before returning to AWS in 2021. Selipsky is a member of the World Economic Forum Information, Technology, and Communications governors, and serves on the Harvard Business School Dean’s Advisory Board. He has an AB in government from Harvard University and an MBA from Harvard Business School. | ||
==== Senior Vice President, Global Public Policy & General Counsel ==== | ==== Senior Vice President, Global Public Policy & General Counsel ==== | ||
[[File:Image67.png|left|thumb]] | [[File:Image67.png|left|thumb]] | ||
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|- | |- | ||
|EBIT | |EBIT | ||
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|- | |- | ||
|''% revenue'' | |''% revenue'' | ||
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|style="color: red;" | | |style="color: red;" | | ||
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!'''Cash Flow items''' <ref>https://www.wsj.com/market-data/quotes/AMZN/financials/annual/cash-flow</ref> | !'''Cash Flow items''' <ref>https://www.wsj.com/market-data/quotes/AMZN/financials/annual/cash-flow</ref> | ||
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|- | |- | ||
|D&A | |D&A | ||
| | |15,341 | ||
| | |21,789 | ||
| | |25,251 | ||
| | |34,296 | ||
| | |41,921 | ||
| | |45,040 | ||
| | |48,392 | ||
| | |51,993 | ||
| | |55,861 | ||
| | |60,018 | ||
|- | |- | ||
|% of | |''% of sales'' | ||
| | |6.59% | ||
| | |7.77% | ||
|8% | |6.54% | ||
| | |7.30% | ||
|7% | |8.16% | ||
| | |7.44% | ||
| | |7.44% | ||
| | |7.44% | ||
| | |7.44% | ||
| | |7.44% | ||
|- | |||
|''% of Capex'' | |||
|style="color: red;" |(114.25)% | |||
|style="color: red;" |-129.23% | |||
|style="color: red;" |-62.91% | |||
|style="color: red;" |-56.17% | |||
|style="color: red;" |-65.87% | |||
|style="color: red;" |-78.54% | |||
|style="color: red;" |-78.54% | |||
|style="color: red;" |-78.54% | |||
|style="color: red;" |-78.54% | |||
|style="color: red;" |-78.54% | |||
|- | |||
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|0 | |||
|0 | |||
|0 | |||
|0 | |||
|- | |||
|Capex | |||
|style="color: red;" |-13,427 | |||
|style="color: red;" |-16,861 | |||
|style="color: red;" |-40,140 | |||
|style="color: red;" |-61,053 | |||
|style="color: red;" |-63,645 | |||
|style="color: red;" |(56,996) | |||
|style="color: red;" |(51,042) | |||
|style="color: red;" |(45,710) | |||
|style="color: red;" |(40,935) | |||
|style="color: red;" |(36,659) | |||
|- | |||
|% of sales | |||
|style="color: red;" |-5.77% | |||
|style="color: red;" |-6.01% | |||
|style="color: red;" |-10.40% | |||
|style="color: red;" |-12.99% | |||
|style="color: red;" |-12.38% | |||
|style="color: red;" |-10.45% | |||
|style="color: red;" |-10.45% | |||
|style="color: red;" |-10.45% | |||
|style="color: red;" |-10.45% | |||
|style="color: red;" |-10.45% | |||
|- | |- | ||
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|0 | |||
|0 | |||
|0 | |||
|0 | |||
|- | |- | ||
| | |Changes in NWC | ||
| | |style="color: red;" |(1,043) | ||
| | |style="color: red;" |(2,438) | ||
| | |13,481 | ||
| | |style="color: red;" |(19,611) | ||
| | |style="color: red;" |(20,886) | ||
| | |style="color: red;" |(20,593) | ||
| | |style="color: red;" |(20,304) | ||
| | |style="color: red;" |(20,019) | ||
| | |style="color: red;" |(19,738) | ||
| | |style="color: red;" |(19,461) | ||
|- | |- | ||
| | |''% of sales'' | ||
|style="color: red;" | - | |style="color: red;" |-0.45% | ||
|style="color: red;" | - | |style="color: red;" |-0.87% | ||
| | |3.49% | ||
|style="color: red;" | - | |style="color: red;" |-4.17% | ||
|style="color: red;" | - | |style="color: red;" |-4.06% | ||
|style="color: red;" | - | |style="color: red;" |-1.40% | ||
|style="color: red;" | - | |style="color: red;" |-1.40% | ||
|style="color: red;" | - | |style="color: red;" |-1.40% | ||
|style="color: red;" | - | |style="color: red;" |-1.40% | ||
|style="color: red;" | - | |style="color: red;" |-1.40% | ||
|- | |- | ||
| | |''% of change in sales'' | ||
|style="color: red;" | - | | | ||
|style="color: red;" | - | |style="color: red;" |-5.12% | ||
|style="color: red;" | - | |12.77% | ||
| | |style="color: red;" |-23.41% | ||
| | |style="color: red;" |-47.30% | ||
|style="color: red;" | - | |style="color: red;" |-15.76% | ||
| | |style="color: red;" |-15.76% | ||
| | |style="color: red;" |-15.76% | ||
| | |style="color: red;" |-15.76% | ||
| | |style="color: red;" |-15.76% | ||
|- | |- | ||
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Line 1,002: | Line 1,081: | ||
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|- | |- | ||
| | !'''DCF''' <ref name=":1" /> | ||
! | |||
! | |||
! | |||
! | |||
! | |||
! | |||
! | |||
! | |||
! | |||
! | |||
|- | |||
|Revenue | |||
|232,887 | |||
|280,522 | |||
|386,064 | |||
|469,822 | |||
|513,983 | |||
|628,566 | |||
|768,693 | |||
|940,058 | |||
|1,149,626 | |||
|1,405,914 | |||
|- | |||
|''% growth'' | |||
| - | | - | ||
| | |20.45% | ||
| | |37.62% | ||
| | |21.70% | ||
| | |9.40% | ||
| | |22.29% | ||
| | |22.29% | ||
| | |22.29% | ||
| | |22.29% | ||
| | |22.29% | ||
|- | |||
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|- | |||
|EBIT | |||
|12,717 | |||
|14,742 | |||
|22,824 | |||
|24,941 | |||
|13,511 | |||
|14,156 | |||
|14,832 | |||
|15,541 | |||
|16,283 | |||
|17,061 | |||
|- | |||
|''% margin'' | |||
|5.46% | |||
|5.26% | |||
|5.91% | |||
|5.31% | |||
|2.63% | |||
|4.78% | |||
|4.78% | |||
|4.78% | |||
|4.78% | |||
|4.78% | |||
|- | |||
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|- | |- | ||
| | |Taxes | ||
| | |1,197 | ||
| | |2,374 | ||
| | |2,863 | ||
|style="color: red;" | | |4,791 | ||
| | |style="color: red;" |(3,217) | ||
|style="color: red;" | | |style="color: red;" |(3,410) | ||
| | |style="color: red;" |(3,615) | ||
| | |style="color: red;" |(3,833) | ||
| | |style="color: red;" |(4,063) | ||
| | |style="color: red;" |(4,307) | ||
|- | |- | ||
| | |''% of EBIT'' | ||
| | |9.41% | ||
| | |16.10% | ||
| | |12.54% | ||
| | |19.21% | ||
| | |style="color: red;" |(23.81)% | ||
| | |6.01% | ||
| | |6.01% | ||
| | |6.01% | ||
| | |6.01% | ||
| | |6.01% | ||
|- | |- | ||
| | | | ||
Line 1,050: | Line 1,201: | ||
| | | | ||
|- | |- | ||
!EBIAT | |||
!11,520 | |||
!12,368 | |||
!19,961 | |||
!20,150 | |||
!16,728 | |||
!17,567 | |||
!18,448 | |||
!19,374 | |||
!20,346 | |||
!21,368 | |||
|- | |- | ||
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| | | | ||
| | | | ||
| | | | ||
| | | | ||
| | | | ||
| | | | ||
| | | | ||
|- | |- | ||
| | |D&A | ||
| | |15,341 | ||
|25, | |21,789 | ||
| | |25,251 | ||
| | |34,296 | ||
| | |41,921 | ||
| | |45,040 | ||
|16 | |48,392 | ||
| | |51,993 | ||
| | |55,861 | ||
| | |60,018 | ||
|- | |||
|''% of sales'' | |||
|6.59% | |||
|7.77% | |||
|6.54% | |||
|7.30% | |||
|8.16% | |||
|7.44% | |||
|7.44% | |||
|7.44% | |||
|7.44% | |||
|7.44% | |||
|- | |- | ||
| | | | ||
| | |||
| | |||
| | |||
| | |||
| | |||
|0 | |||
|0 | |||
|0 | |||
|0 | |||
|0 | |||
|- | |||
|Capex | |||
|style="color: red;" |(13,427) | |||
|style="color: red;" |(16,861) | |||
|style="color: red;" |(40,140) | |||
|style="color: red;" |(61,053) | |||
|style="color: red;" |(63,645) | |||
|style="color: red;" |(56,996) | |||
|style="color: red;" |(51,042) | |||
|style="color: red;" |(45,710) | |||
|style="color: red;" |(40,935) | |||
|style="color: red;" |(36,659) | |||
|- | |||
|''% of slaes'' | |||
|style="color: red;" |(5.77)% | |||
|style="color: red;" |(6.01)% | |||
|style="color: red;" |(10.40)% | |||
|style="color: red;" |(12.99)% | |||
|style="color: red;" |(12.38)% | |||
|style="color: red;" |(10.45)% | |||
|style="color: red;" |(10.45)% | |||
|style="color: red;" |(10.45)% | |||
|style="color: red;" |(10.45)% | |||
|style="color: red;" |(10.45)% | |||
|- | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
|0 | |||
|0 | |||
|0 | |||
|0 | |||
|0 | |||
|- | |||
|Changes in NWC | |||
|style="color: red;" |(1,043) | |||
|style="color: red;" |(2,438) | |||
|13,481 | |||
|style="color: red;" |(19,611) | |||
|style="color: red;" |(20,886) | |||
|style="color: red;" |(20,593) | |||
|style="color: red;" |(20,304) | |||
|style="color: red;" |(20,019) | |||
|style="color: red;" |(19,738) | |||
|style="color: red;" |(19,461) | |||
|- | |||
|''% of sales'' | |||
|style="color: red;" |(0.45)% | |||
|style="color: red;" |(0.87)% | |||
|3.49% | |||
|style="color: red;" |(4.17)% | |||
|style="color: red;" |(4.06)% | |||
|style="color: red;" |(1.40)% | |||
|style="color: red;" |(1.40)% | |||
|style="color: red;" |(1.40)% | |||
|style="color: red;" |(1.40)% | |||
|style="color: red;" |(1.40)% | |||
|- | |||
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|- | |||
|Unlevered FCF | |||
|14,477 | |||
|19,734 | |||
|style="color: red;" |(8,409) | |||
|13,004 | |||
|15,890 | |||
|26,203 | |||
|36,101 | |||
|45,675 | |||
|55,010 | |||
|64,188 | |||
|- | |||
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|- | |||
|Year count | |||
| | |||
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| | |||
| | |||
| | |||
|0.52 | |||
|1.52 | |||
|2.52 | |||
|3.52 | |||
|4.52 | |||
|- | |||
|Discount factor | |||
| | |||
| | |||
| | |||
| | |||
| | |||
|0.96 | |||
|0.89 | |||
|0.83 | |||
|0.77 | |||
|0.71 | |||
|- | |||
!Present value of FCF | |||
! | |||
! | |||
! | |||
! | |||
! | |||
!25207 | |||
!32233 | |||
!37850 | |||
!42311 | |||
!45823 | |||
|} | |} | ||
Sources suggest a terminal growth rate within the 3-5% range | Sources suggest a terminal growth rate within the 3-5% range. The DCF model employs an average estimate of 4%, but the full range is accommodated in the sensitivity analysis. This figure is used in calculating the terminal value, which, when discounted, results in a present terminal value of approximately $1.273 trillion. | ||
In calculating the DCF that forecasts the financial trajectory of a US-based company over the next five years, the risk-free rate is pegged at the US 5-year Treasury rate of 3.87% | In calculating the DCF that forecasts the financial trajectory of a US-based company over the next five years, the risk-free rate is pegged at the US 5-year Treasury rate of 3.87%. This figure represents the monthly average rate spanning from January to July 2023. | ||
The summarised estimates from the DCF analysis can be found in the table below. | The summarised estimates from the DCF analysis can be found in the table below. | ||
Line 1,096: | Line 1,401: | ||
!Input name | !Input name | ||
!Input value | !Input value | ||
! | !Input value reason | ||
|- | |- | ||
|Risk free rate | |Risk free rate | ||
|3.87% | |3.87% | ||
|US | |Here, the five-year US bond is used. | ||
|- | |- | ||
|Market risk premium | |Market risk premium | ||
|4.70% | |4.70% | ||
| | | | ||
|- | |- | ||
|Levered beta | |Levered beta | ||
|0.88 | |0.88 | ||
| | | | ||
|- | |- | ||
|Cost of equity | |Cost of equity | ||
|8.01% | |8.01% | ||
| | | | ||
|- | |- | ||
|Cost of debt | |Cost of debt | ||
|5.25% | |5.25% | ||
| | | | ||
|- | |- | ||
|Internally calculated WACC | |Internally calculated WACC | ||
|7.74% | |7.74% | ||
| | | | ||
|- | |- | ||
|Terminal growth rate | |Terminal growth rate | ||
| | |4% | ||
| | | | ||
|} | |} | ||
The market risk premium fluctuates between 4.2% and 5.2% <ref | The market risk premium fluctuates between 4.2% and 5.2% <ref>https://valueinvesting.io/AMZN/valuation/wacc</ref>, thus we employ an average of 4.7% for our calculations. The volatility of Amazon's stock price is viewed as being lower relative to the general market. This is reflected in its beta, which varies from 0.64 to 1.12 <ref>https://valueinvesting.io/AMZN/valuation/wacc</ref>, yielding an average of 0.88. Consequently, we derive a cost of equity of 8.01%. When this is combined with the cost of debt, which stands at 5.25% <ref>[https://www.theguardian.com/business/2023/jun/14/fed-interest-rate-pause-inflation#:~:text=US%20Federal%20Reserve%20officials%20have,year%20of%20consecutive%20rate%20increases. https://www.theguardian.com/business/2023/jun/14/fed-interest-rate-pause-inflation#:~:text=US%20Federal%20Reserve%20officials%20have,year%20of%20consecutive%20rate%20increases.]</ref>, we arrive at a weighted average cost of capital (WACC) of 7.74%. | ||
In the process of discounting the future Free Cash Flow to its present value, the WACC serves as the discount factor. The count of years commences from 0.52. This calculation leads to a share price of $135.57, a summary of which is presented in the table below. | |||
{| class="wikitable" | {| class="wikitable" | ||
!Metric | !Metric | ||
!Metric value | !Metric value | ||
|- | |- | ||
| | |Enterprise value ($): | ||
|1,457,196 | |||
|1, | |||
|- | |- | ||
| | |(+) Cash ($): | ||
| | |69,674 <ref name=":2">https://www.wsj.com/market-data/quotes/AMZN/financials/annual/balance-sheet</ref> | ||
|- | |- | ||
| | |(-) Debt ($): | ||
| | |141,000 <ref name=":2" /> | ||
|- | |- | ||
| | |Equity Value ($): | ||
| | |1,385,520 | ||
|- | |- | ||
| | |Shares (millions): | ||
| | |10,220<ref>https://www.marketwatch.com/investing/stock/amzn</ref> | ||
|- | |- | ||
| | |Share Price ($): | ||
|135.57 | |||
| | |||
|} | |} | ||
The closing share price for Amazon stocks on | The closing share price for Amazon stocks on 10th July 2023 stood at $127.20<ref>https://www.marketwatch.com/investing/stock/amzn</ref>. | ||
We conducted a sensitivity analysis using a WACC range of 6.5% to 9.0%, and a terminal growth rate span of | We conducted a sensitivity analysis using a WACC range of 6.5% to 9.0%, and a terminal growth rate span of 2.5% to 5.0%. | ||
{| class="wikitable" | {| class="wikitable" | ||
! | ! | ||
Line 1,191: | Line 1,475: | ||
|- | |- | ||
! rowspan="6" |Terminal growth rate | ! rowspan="6" |Terminal growth rate | ||
!2.5% | !2.5% | ||
|$ | |$132.60 | ||
|$ | |$116.65 | ||
|$ | |$103.90 | ||
|$ | |$98.62 | ||
|$ | |$93.47 | ||
|$ | |$84.79 | ||
|$ | |$77.45 | ||
|- | |- | ||
!3.0% | !3.0% | ||
|$ | |$150.57 | ||
|$ | |$130.40 | ||
|$ | |$114.72 | ||
|$ | |$108.34 | ||
|$ | |$102.18 | ||
|$ | |$91.93 | ||
|$ | |$83.40 | ||
|- | |- | ||
!3.5% | !3.5% | ||
|$ | |$174.53 | ||
|$ | |$148.08 | ||
|$ | |$128.24 | ||
|$ | |$120.35 | ||
|$ | |$112.83 | ||
|$ | |$100.50 | ||
|$ | |$90.42 | ||
|- | |- | ||
!4.0% | !4.0% | ||
|$ | |$208.08 | ||
|$ | |$171.65 | ||
|$ | |$145.63 | ||
|$ | |$135.57 | ||
|$ | |$126.13 | ||
|$ | |$110.97 | ||
|$ | |$98.85 | ||
|- | |||
!4.5% | |||
|$258.40 | |||
|$204.64 | |||
|$168.82 | |||
|$155.49 | |||
|$143.24 | |||
|$124.07 | |||
|$109.16 | |||
|- | |||
!5.0% | |||
|$342.26 | |||
|$254.14 | |||
|$201.28 | |||
|$182.67 | |||
|$166.05 | |||
|$140.90 | |||
|$122.04 | |||
|} | |} | ||
=== Relative Valuation === | === Relative Valuation === | ||
A comparable trade analysis is conducted to establish a relative valuation for Amazon, supplementing the aforementioned absolute DCF valuation. The analysis takes into account key competitors, such as Alibaba and Ebay <ref>https://www.shopify.com/blog/amazon-competitors</ref>. | A comparable trade analysis is conducted to establish a relative valuation for Amazon, supplementing the aforementioned absolute DCF valuation. The analysis takes into account key competitors, such as Alibaba and Ebay <ref>https://www.shopify.com/blog/amazon-competitors</ref>. | ||
{| class="wikitable" | {| class="wikitable" | ||
!Name | !Name | ||
!P/E | !Mkt Cap ($ millions) | ||
!EV/EBITDA | |||
!P/E | |||
|- | |||
|Amazon.Com Inc | |||
|1,337,745 | |||
|21.36 | |||
|140.55 | |||
|- | |||
|Alibaba Group Holding-Sp Adr | |||
|217,920 | |||
|6.96 | |||
|13.71 | |||
|- | |- | ||
| | |Ebay Inc | ||
| | |24,069 | ||
|10.02 | |||
|14.64 | |||
| | |||
| | |||
|- | |- | ||
| | |Allegro.Eu Sa | ||
|8,131 | |||
| | |17.73 | ||
| | |#N/A N/A | ||
| | |||
|- | |- | ||
|Etsy Inc | |Etsy Inc | ||
| - | |10,503 | ||
| - | |24.81 | ||
| | |34.45 | ||
| - | |- | ||
| | |Vipshop Holdings Ltd - Adr | ||
|9,116 | |||
| - | |||
|10.15 | |||
|- | |||
|Verkkokauppa.Com Oyj | |||
|128 | |||
|14.63 | |||
| - | |||
|- | |- | ||
| | |Mercadolibre Inc | ||
| | |62,627 | ||
|34.66 | |||
|101.25 | |||
| | |||
| | |||
|- | |- | ||
| | |Chewy Inc - Class A | ||
|16,157 | |||
|62.47 | |||
| | |302.76 | ||
| | |||
| | |||
|- | |- | ||
| | |Jd.Com Inc-Adr | ||
|55,402 | |||
|10.04 | |||
| | |17.86 | ||
| | |||
| | |||
|- | |- | ||
| | |Next Plc | ||
| | |10,942 | ||
|10.67 | |||
|11.73 | |||
| | |||
| | |||
|- | |- | ||
| | |Revolve Group Inc | ||
| | |1,216 | ||
|14.35 | |||
|22.30 | |||
| | |||
| | |||
|- | |- | ||
| | |1-800-Flowers.Com Inc-Cl A | ||
| | |496 | ||
| | |7.20 | ||
| | |55.52 | ||
| | |- | ||
| | |Pdd Holdings Inc | ||
| | |90,833 | ||
| - | |||
|43.91 | |||
|- | |- | ||
| | |Zalando Se | ||
|7,090 | |||
|14.32 | |||
| | |178.73 | ||
| | |||
| | |||
|- | |- | ||
| | |Zozo Inc | ||
| | |6,250 | ||
|14.34 | |||
|21.88 | |||
| | |||
| | |||
|- | |- | ||
! colspan="4" |Summary Statistics | |||
| | |||
|- | |- | ||
| | |Minimum | ||
| | |128 | ||
| | |6.96 | ||
| | |10.15 | ||
|- | |- | ||
| | |Lower Quartile | ||
| | |6,670 | ||
|10. | |10.20 | ||
|15.45 | |||
| | |||
|- | |- | ||
| | |Median | ||
| | |10,503 | ||
|14.35 | |||
|28.38 | |||
| | |||
| | |||
|- | |- | ||
| | |Upper Quartile | ||
| | |39,735 | ||
|20.45 | |||
|89.82 | |||
| | |||
| | |||
|- | |- | ||
| | |Maximum | ||
| | |217,920 | ||
| | |62.47 | ||
| | |302.76 | ||
|- | |- | ||
| | |Mean | ||
| | |34,725 | ||
|18.83 | |||
|69.25 | |||
| | |||
| | |||
|} | |} | ||
The EV/EBITDA ratio, a commonly used valuation metric, takes into account both debt and liabilities relative to the actual earnings. On the other hand, the P/E ratio serves as an effective tool to determine whether a stock is undervalued or overvalued compared to its industry peers. | |||
The table provides a brief analysis of the ratios and market cap of the 15 companies in the analysis including their minimum/maximum, median, quartile and mean values. | |||
The mean EV/EBITDA obtained for the set of 15 companies in the analysis is 18.83, which results in a relatively valued share price of $100.30. The mean P/E ratio in the industry is 69.25 which results in a relatively valued share price of $108.02. | |||
== Appendix == | == Appendix == |