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== Summary ==
{{Infobox company
| name = Amazon.com, Inc.
| logo = Amazon logo.svg
| image = Amazon Tower I topped out, June 2015.jpg
| image_caption = [[Doppler (building)|Doppler]] building, Amazon's headquarters in Seattle
| trade_name = Amazon
| former_name = Cadabra, Inc. (1994–1995)
| type = [[Public company|Public]]
| traded_as = {{ubl|{{NASDAQ|AMZN}}|[[Nasdaq-100]] component|[[S&P 100]] component|[[S&P 500]] component}}
| ISIN = {{ISIN|sl=n|pl=y|US0231351067}}
| industry = {{hlist| [[Conglomerate (company)|Conglomerate]]
}}
| founded = {{start date and age|1994|07|05}}<br />[[Bellevue, Washington]], U.S.
| founder = [[Jeff Bezos]]
| hq_location_city = [[Seattle, Washington]] and [[Arlington, Virginia]]
| hq_location_country = U.S.
| area_served = Worldwide
| key_people = {{unbulleted list|Jeff Bezos<br />([[chairman]])|[[Andy Jassy]]<br />([[President (corporate title)|president]] and [[Chief executive officer|CEO]])}}
| products = {{hlist|[[Amazon Echo|Echo]]|[[Amazon Fire tablet|Fire Tablet]]|[[Amazon Fire TV|Fire TV]]|[[Fire OS]]|[[Amazon Kindle|Kindle]]}}
| services = {{plainlist|
* [[Amazon.ca|Amazon.com]]
* [[Amazon Alexa]]
* [[Amazon Appstore]]
* [[Amazon Luna]]
* [[Amazon Music]]
* [[Amazon Pay]]
* [[Amazon Prime]]
* [[Amazon Prime Video]]
* [[Twitch (service)|Twitch]]
* [[Ring (company)|Ring]]
* [[Amazon Web Services]]
* [[Amazon Robotics]]
}}
| revenue = {{increase}} US$513.98 billion (2022)
| operating_income = {{decrease}} US$12.25 billion (2022)
| net_income = {{decrease}} US${{color|red|&minus;2.72}} billion (2022)
| assets = {{increase}} US$462.68 billion (2022)
| equity = {{increase}} US$146.04 billion (2022)
| num_employees = {{ubl|class=nowrap|{{decrease}} 1,541,000 (December 2022) | U.S.: 950,000 (June 2021)}}
| subsid = {{collapsible list|[[A9.com]]|[[AbeBooks]]|[[Alexa Internet]]|[[Amazon.com]]|[[Amazon Air]]|[[Amazon Books]]|[[Amazon Fresh]]|[[Amazon Games]]|[[Amazon Lab126]]|[[Amazon Logistics]]|[[Amazon Pharmacy]]|[[Amazon Publishing]]|[[Amazon Robotics]]|[[Amazon Studios]]|[[Amazon Web Services|AWS]]|[[Audible (service)|Audible]]|[[Blink Home|Blink]]|[[Body Labs]]|[[Book Depository]]|[[ComiXology]]|[[Digital Photography Review]]|Eero LLC|[[Goodreads]]|[[Graphiq]]|[[IMDb]]|[[MGM Holdings]]|[[PillPack]]|[[Ring (company)|Ring]]|[[Souq.com]]|[[Twitch Interactive]]|[[Whole Foods Market]]|[[Woot]]|[[Zappos]]|[[Zoox (company)|Zoox]]}}
| owner = Jeff Bezos (9.8%)
| website = {{Official url}}
| footnotes = <ref name=10K>{{cite web | url=https://www.sec.gov/ix?doc=/Archives/edgar/data/1018724/000101872423000004/amzn-20221231.htm | title=Amazon.com, Inc. 2022 Form 10-K Annual Report | publisher=[[U.S. Securities and Exchange Commission]] |date=February 3, 2022}}</ref><ref>{{cite web |url=https://businesssearch.sos.ca.gov/ |title=California Secretary of State Business Search |publisher=[[Secretary of State of California]] |access-date=October 26, 2018 |archive-date=February 23, 2018 |archive-url=https://web.archive.org/web/20180223134214/https://businesssearch.sos.ca.gov/ |url-status=dead }}</ref><ref>{{cite web | url=https://www.sec.gov/Archives/edgar/data/1018724/000110465922045572/tm223357-5_def14a.htm#tBOOS | title=Amazon.com, Inc. 2022 Proxy Statement | publisher=[[U.S. Securities and Exchange Commission]] |date=April 14, 2022}}</ref><ref>{{cite web |url=https://www.businessinsider.com/amazon-employees-number-1-of-153-us-workers-head-count-2021-7 |title=1 out of every 153 American workers is an Amazon employee |work=Business Insider |last=Reuter |first=Dominick |date=July 30, 2021 |access-date=February 4, 2022}}</ref>
}}


Amazon's mission is to be the most customer-centric company, the best employer, and the safest workplace on Earth. They prioritize 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's key revenue drivers are e-commerce retail, third-party seller services, AWS, and subscription services. Amazon dominates the e-commerce market in the US, and its smart speakers with Alexa hold a significant market share. The company faces competition in different segments from players such as Walmart, Apple, Google, and Alibaba. Amazon is also involved in initiatives related to renewable energy, satellite network (Project Kuiper), industrial innovation, lending, and has a strong leadership team guiding its operations. Despite some financial challenges, Amazon continues to invest in its infrastructure, logistics capabilities, physical assets, and strategic acquisitions to maintain its market leadership and drive innovation.
== 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's key revenue drivers are e-commerce retail, third-party seller services, AWS, and subscription services. Amazon dominates the e-commerce market in the US, and its smart speakers with Alexa hold a significant market share.  
 
Amazon faces competition in different segments from players such as Walmart, Apple, Google, and Alibaba. Amazon is also involved in initiatives related to renewable energy, satellite network (Project Kuiper), industrial innovation, lending, and has a strong leadership team guiding its operations. Despite some financial challenges, Amazon continues to invest in its infrastructure, logistics capabilities, physical assets, and strategic acquisitions to maintain its market leadership and drive innovation.
<!-- Add information to this summary section about the company's valuation and risks. Also, add references to each paragraph/sentence. -->
== The idea ==
Amazon.com was founded by Jeff Bezos in 1994. The idea for the company came about when Bezos, a Princeton graduate and successful Wall Street executive, recognized the enormous potential of the Internet and e-commerce in the early 1990s.
 
In 1994, he came across a statistic that the Internet was growing at a rate of 2300% per year. Intrigued, Bezos left his job at D.E. Shaw, a hedge fund, and started to explore potential business ideas that could be capitalized on this boom.
 
Bezos made a list of 20 possible product categories to sell online, and books were on top of the list. The reasons were many - books were low cost and universally demanded. Plus, no physical bookstore could match the selection of books that an online store could offer.
 
After moving to Seattle, Bezos set up the business in his garage, where he and a few employees began developing the software for Amazon.com. He named his new company after the Amazon River in South America, in part because it suggested scale (Amazon River is the largest in the world), and his goal was for Amazon to become the largest bookstore in the world.
 
Amazon.com was officially launched in July 1995. In the beginning, it was only a bookstore. Still, Bezos had a vision for Amazon to become an "everything store". Today, Amazon sells millions of different items, and its business interests extend far beyond retail to include cloud services, digital streaming, artificial intelligence, and more.


== Mission Statement ==
== Mission Statement ==
Amazon’s mission is to be Earth’s most customer-centric company, Earth’s best employer, and Earth’s safest place to work. They are guided by four principles, customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. The company’s focus is on satisfaction of the people be it customers and employees alike and strives to maintain a competitive edge in the market through strategies that revolve around this.
Amazon's mission statement is:
 
== Segments covered by Amazon ==


=== '''E-Commerce:''' ===
"Our mission is to be Earth's most customer-centric company. This is what unites Amazonians across teams and geographies as we are all striving to delight our customers and make their lives easier, one innovative product, service, and idea at a time."
Amazon is one of the world's largest online marketplaces, selling a vast array of products, including electronics, books, apparel, household items, and more.


=== '''Cloud Computing services:''' ===
This statement reflects Amazon's aim to put the customer first and continuously innovate on their behalf.
Amazon provides several cloud computing services to businesses and individuals, via its platform called Amazon Web Services (AWS) and it provides the following:


a.     Infrastructure as a service (IaaS): access to virtual servers, storage and networking withouth the need for a physical hardware
== Segments covered by Amazon ==


b.     Platform as a service (PaaS): ability to create applications using pre made platform templates
=== E-Commerce ===
Amazon operates as one of the world's most expansive online retail platforms, offering an extensive assortment of products spanning categories such as electronics, books, clothing, and household goods, among others. <!-- Largest in terms of what exactly, 1) total products and offerings, 2) total district products and services, or 3) something else? If something else, detail what the something else is. -->


c.     Software as a service (SaaS); ability to use certain applications without buying them
=== Cloud Computing services ===
Through its dedicated cloud computing platform, Amazon Web Services (AWS), Amazon offers a range of services to businesses and individuals, including:


=== '''Digital Content:''' ===
# '''Infrastructure as a Service (IaaS):''' This service allows users to access virtual servers, storage, and networking capabilities, eliminating the need for physical hardware.
Amazon offers a variety of digital content platforms such as


a.     Amazon Prime Video for streaming movies and TV shows
# '''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.


b.    Amazon Music for streaming music
=== Digital Content ===
Amazon provides an extensive array of digital content platforms tailored to cater to a range of interests:


c.     Kindle for e-books.
# '''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 ===
a.     Amazon has developed an extensive logistics and delivery network to fulfil orders efficiently, including its own delivery service called Amazon Logistics.
Amazon has developed an extensive logistics and delivery network to fulfil orders efficiently, including its own delivery service called Amazon Logistics.


=== '''Smart Home Devices:''' ===
=== Smart Home Devices ===
a.     Amazon has introduced various smart home devices under the Amazon Echo brand, powered by the virtual assistant Alexa. These include smart speakers, smart displays, and smart home automation devices.
Amazon has introduced various smart home devices under the Amazon Echo brand, powered by the virtual assistant Alexa. These include smart speakers, smart displays, and smart home automation devices.


=== '''Grocery and Food Delivery:''' ===
=== Grocery and Food Delivery ===
a.     Through Amazon Fresh, Whole Foods Market (acquired by Amazon in 2017), and Amazon Prime Now, the company provides grocery and food delivery services. Amazon Prime Now, will stop existing and the fast delivery service will be combined with the third party partners
Through Amazon Fresh, Whole Foods Market (acquired by Amazon in 2017), and Amazon Prime Now, the company provides grocery and food delivery services. Amazon Prime Now, will stop existing and the fast delivery service will be combined with the third party partners


=== '''Healthcare:''' ===
=== Healthcare ===
a.     Amazon has expanded into the healthcare sector with initiatives such as Amazon Pharmacy, offering prescription medication delivery, and Amazon Care, a virtual healthcare service for employees.
Amazon has expanded into the healthcare sector with initiatives such as Amazon Pharmacy, offering prescription medication delivery, and Amazon Care, a virtual healthcare service for employees.


=== '''Entertainment and Media:''' ===
=== Entertainment and Media ===
a.     Amazon Studios produces and distributes original movies and TV shows through Amazon Prime Video. The company has also ventured into sports broadcasting, streaming live sports events.
Amazon Studios produces and distributes original movies and TV shows through Amazon Prime Video. The company has also ventured into sports broadcasting, streaming live sports events.


=== '''Advertising:''' ===
=== Advertising ===
a.     Amazon has a growing advertising business, offering advertising solutions for brands to reach customers on its platforms through Amazon Advertising.
Amazon is steadily expanding its advertising division, providing a comprehensive suite of products and services via Amazon Advertising. This enables brands to effectively reach their customers on Amazon's various platforms.


=== '''Hardware and Consumer Electronics:''' ===
=== Hardware and Consumer Electronics ===
a.     In addition to its smart home devices, Amazon manufactures and sells hardware products like Fire tablets, Kindle e-readers, and Fire TV streaming devices.
Beyond its range of smart home devices, Amazon also produces and retails an array of hardware products. This includes the Fire series of tablets and TV streaming devices, as well as the popular Kindle e-readers.


=== '''Other include:''' ===
=== Others ===
a.     Robotics (amazon scout etc), space exploration (blue origin), AI and machine learning  
Other business sectors Amazon is involved in include Robotics, as demonstrated by initiatives like Amazon Scout, and space exploration, spearheaded by Blue Origin. The company also has significant investments in artificial intelligence and machine learning technologies.


== Breakdown of sector revenues<ref><nowiki>https://fourweekmba.com/amazon-revenue-breakdown/</nowiki> </ref> ==
== Breakdown of sector revenues<ref><nowiki>https://fourweekmba.com/amazon-revenue-breakdown/</nowiki> </ref><!-- Add the sources to the individual paragraphs/sentences. That said, I think the source here is a poor one, so I suggest using another, more reliable one -->==


=== '''E-commerce Retail:''' ===
=== E-commerce Retail ===
Amazon's primary sector is e-commerce retail, which includes the sales of various consumer goods through its online platform. This category covers a wide range of products, including electronics, books, clothing, home goods, and more. In 2022, Amazon's online stores raked in an impressive $220 billion in revenue.  
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. This accounts for 42% of the company's income which is basically a fee from 3rd party retailers selling their products on amaozn. <!-- The word 'impressive' is a relative term. Impressive how? -->


=== '''Physical stores:''' ===
=== Physical stores ===
Amazon's physical stores have been experiencing significant growth in terms of revenues. With their diverse range of offerings, including Amazon Go cashier-less stores, Amazon Books, and Amazon 4-star, these brick-and-mortar locations have successfully attracted customers, resulting in substantial revenue generation for the e-commerce giant. In 2022, Amazon's online stores raked in an impressive $18.96 billion in revenue.  
Amazon's physical stores have been experiencing significant growth in terms of revenues<!-- Quantify this, in terms of amount and time period. For example, ... growing my a compound annual growth rate of 20% over the five year period ended 31st December 2022. -->. With their diverse range of offerings, including Amazon Go cashier-less stores, Amazon Books, and Amazon 4-star, the brick-and-mortar locations have attracted customers that resulted in substantial revenue for the e-commerce giant. In 2022, Amazon's online stores raked in an $18.96 billion in revenue.  


=== '''Amazon Web Services (AWS):''' ===
=== Amazon Web Services (AWS) ===
AWS is a cloud computing platform offered by Amazon. It provides numerous services such as storage, computing power, database management, and analytics to businesses and individuals. AWS has been a significant revenue driver for Amazon, contributing a massive portion of its overall revenue. In 2022, Amazon's revenue from Amazon Web Services (AWS) amounted to a staggering $80 billion.  
AWS is a cloud computing platform offered by Amazon. It provides numerous services, such as storage, computing power, database management, and analytics, to businesses and individuals. AWS has been a significant revenue driver for Amazon, contributing a significant portion of its overall revenue. In 2022, Amazon's revenue from Amazon Web Services (AWS) amounted to a $80 billion.  


=== '''Subscription Services:''' ===
=== Subscription Services ===
Amazon offers various subscription-based services, such as Amazon Prime, which provides benefits like free shipping, streaming of movies and TV shows, and access to exclusive deals. Prime membership fees contribute to the subscription services sector revenue. For the year 2022, Amazon generated $35.22 billion from Subscription Services.  
Amazon offers various subscription-based services, such as Amazon Prime, which provides benefits like free shipping, streaming of movies and TV shows, and access to exclusive deals. Prime membership fees contribute to the subscription services sector revenue. For the year 2022, Amazon generated $35.22 billion from Subscription Services.  


=== '''Third-Party Seller Services:''' ===
=== Third-Party Seller Services ===
Amazon allows third-party sellers to sell their products through its platform. Amazon charges fees for services like fulfilment (through its Fulfilment by Amazon program), referral fees, and advertising. These fees contribute to the third-party seller services sector. In the year 2022, Third-Party Seller Services contributed to Amazon's revenue with a staggering $117.71 billion.  
Amazon allows third-party sellers to sell their products through its platform. Amazon charges fees for services like fulfilment (through its Fulfilment by Amazon program), referral fees, and advertising. These fees contribute to the third-party seller services sector. In the year 2022, Third-Party Seller Services contributed to Amazon's revenue with a staggering $117.71 billion.  


=== '''Advertising:''' ===
=== Advertising ===
Amazon has been expanding its advertising business by offering display and sponsored product ads on its platform. This sector generates revenue through advertising fees paid by businesses to promote their products on Amazon. In 2022, the advertising revenue generated by Amazon amounted to $37.74 billion.  
Amazon has been expanding its advertising business by offering display and sponsored product ads on its platform. This sector generates revenue through advertising fees paid by businesses to promote their products on Amazon. In 2022, the advertising revenue generated by Amazon amounted to $37.74 billion.  


=== '''Other Revenue:''' ===
=== Other Revenue ===
This category includes various sources of revenue for Amazon that do not fall into the aforementioned sectors. It may include revenue from physical stores (such as Whole Foods Market, acquired by Amazon), digital content sales, and other miscellaneous sources. For the year 2022, Amazon generated $4.25B billion from Other Revenue.  
This category includes various sources of revenue for Amazon that do not fall into the aforementioned sectors. It may include revenue from physical stores (such as Whole Foods Market, acquired by Amazon), digital content sales, and other miscellaneous sources. For the year 2022, Amazon generated $4.25B billion from Other Revenue.  


== Amazon market shares across key segments<ref>[https://www.t4.ai/companies/amazon-market-share#:~:text=Amazon%27s%20Market%20Share%20in%20E,Streaming%20%2D%2013%25%20in%202019. https://www.t4.ai/companies/amazon-market-share#:~:text=Amazon%27s%20Market%20Share%20in%20E,Streaming%20%2D%2013%25%20in%202019.]</ref> ==
== Amazon market shares across key segments ==
The previous section showcases Amazon’s breakdown of revenue and the most important segments to Amazon from the perspective of revenues are: e-commerce, third party seller services, AWS and subscription services. Below figures will illustrate the market share of Amazon in some of those segments.
The previous section showcases Amazon’s breakdown of revenue and the most important segments to Amazon from the perspective of revenues are: e-commerce, third party seller services, AWS and subscription services. Below figures will illustrate the market share of Amazon in some of those segments.<ref>[https://www.t4.ai/companies/amazon-market-share#:~:text=Amazon%27s%20Market%20Share%20in%20E,Streaming%20%2D%2013%25%20in%202019. https://www.t4.ai/companies/amazon-market-share#:~:text=Amazon%27s%20Market%20Share%20in%20E,Streaming%20%2D%2013%25%20in%202019.]</ref>


=== '''US e-commerce market share (June 2022)'''<ref>[https://aag-it.com/the-latest-cloud-computing-statistics/#:~:text=AWS%20remains%20the%20most%20popular,%2C%20with%20revenue%20up%2024%25. https://aag-it.com/the-latest-cloud-computing-statistics/#:~:text=AWS%20remains%20the%20most%20popular,%2C%20with%20revenue%20up%2024%25.]</ref> ===
=== US e-commerce market share (June 2022) ===
The US e-commerce is clearly dominated by Amazon followed by Walmart, Apple and eBay. Other players hold maximum of 2% of the market. Some related statistics about Amazon are as follows:
Amazon is the indisputable leader in the US e-commerce sector, enjoying a commanding position, with Walmart, Apple, and eBay trailing behind. Other participants in the market hold a mere maximum of 2% of the overall share.<ref>[https://aag-it.com/the-latest-cloud-computing-statistics/#:~:text=AWS%20remains%20the%20most%20popular,%2C%20with%20revenue%20up%2024%25. https://aag-it.com/the-latest-cloud-computing-statistics/#:~:text=AWS%20remains%20the%20most%20popular,%2C%20with%20revenue%20up%2024%25.]</ref>


[[File:Us_e_commerce_market.png]]
[[File:Us_e_commerce_market.png]]


 
Noteworthy statistics regarding Amazon's position in the industry are as follows:
The US e-commerce is clearly dominated by Amazon followed by Walmart, Apple and eBay. Other players hold maximum of 2% of the market. Some related statistics about Amazon are as follows:
{| class="wikitable"
{| class="wikitable"
|+
|+
|2021 e-commerce Amazon revenue:
!Statistic
!Statistic value
|-
|2021 Amazon e-commerce revenue
|USD 220 billion
|USD 220 billion
|-
|-
|Number of active sellers (2022):
|Number of active sellers (2022)
|9.7 million
|9.7 million
|-
|-
|Number of shipments in 2021:
|Number of shipments in 2021
|7.7 billion
|7.7 billion
|-
|-
|Global number of users (2022):
|Global number of users (2022)
|310 million
|310 million
|-
|-
|Number of fulfilment centres (2023):
|Number of fulfilment centres (2023)
|185
|185
|-
|-
|Total area of fulfilment centres (2019):
|Total area of fulfilment centres (2019)
|150 mln sq ft
|150 mln sq ft
|}
|}


=== '''Smart speaker market share (2020)''' ===
== Ecommerce Trends ==
[[File:Smart_speaker_market.png]]
Global eccomerce sales will reach $5.8 trillion in 2023, reaching $8 trillion in 2027 (https://www.shopify.com/uk/blog/global-ecommerce-sales). Between 2023 and 2028 the average annual growth rate of ecommerce sales will be 8.62% (https://www.oberlo.com/statistics/global-ecommerce-sales-growth). This growth is being supported by mobile use for online shopping. Mobile ecommerce is expected to 42.9% of ecommerce sales by 2024.


Amazon's eccomerce sales was as follows: 


141.2 billion 2019 


Similarly, to e-commerce, Amazon dominates the market of smart speakers with the help of Alexa
197.3 billion 2020 (40% increase) 


In general, the most demanded products from Amazon can be shown in the below diagram. Amazon is most popular with electronics goods followed by clothing with shoes and then home and furniture. The least frequent orders are pet supplies.<ref name=":0">https://financesonline.com/amazon-statistics/</ref>
222 billion 2021 (12.53% increase) 


[[File:Stats1.png]]
220 billion in 2022 (decline of 0.932%) 


Popularity of Amazon’s as an e-commerce does not end here. Amazon is also the place where more than half of online purchasers start their search.<ref name=":0" />
The 40% in 2020 was due to covid. While this growth is unique as a result of that year the sales volumes have remained in that region as a result. Furthermore, Amazon market share of global eccomerce sales increased singificantly in 2020 as global growth only reached 25.7% (https://www.velotrade.com/blog/global-growth-of-ecommerce-markets/). However, since this Amazon's growth has been trivial to global growth in eccomcer sales - global growth reaching 19.6% in 2021 and 12.7% in 2022 (https://www.velotrade.com/blog/global-growth-of-ecommerce-markets/). 


[[File:Stats2.png]]
=== Smart speaker market share (2020) ===
[[File:Smart_speaker_market.png]]


=== '''Cloud computing market''' ===
Much like their unrivalled presence in the e-commerce industry, Amazon's smart speakers, powered by the popular voice assistant Alexa, maintain a dominant position in the market.


=== [[File:Stats3.png]] ===
The following diagram illustrates the demand for various products on Amazon. Electronics goods emerge as the most sought-after category, closely followed by clothing and shoes, and then home and furniture. Conversely, pet supplies rank as the least frequently ordered items on the platform.<ref name=":0">https://financesonline.com/amazon-statistics/</ref>


[[File:Stats1.png]]


Amazon's prominence as an e-commerce giant extends beyond its popularity in product categories. In fact, it serves as the initial search destination for over half of online shoppers, cementing its position as a starting point for their online purchasing journey.<ref name=":0" />


In 2019, Amazon outperformed its major competitors across the entire cloud computing market with a total market share of 18%. Out of the cloud computing, Amazon is most popular among Infrastructure as a service segment with a eye watering 45% of market share. In q1 2022, AWS is still the preferred provider of cloud computing services with Azure (cloud computing provided by Microsoft) catching up but still below.
[[File:Stats2.png]]


=== Cloud computing market ===


=== [[File:Stats3.png]] ===


Some of the cloud computing market trends that AWS could take advantage of are:
In 2019, Amazon dominated the cloud computing market, surpassing its major competitors with a significant 18% market share. Among the various segments of cloud computing, Amazon's Infrastructure as a Service (IaaS) holds an impressive 45% market share. As of Q1 2022, AWS continues to lead as the preferred provider of cloud computing services, with Microsoft's Azure making progress but still trailing behind.


# The cloud becomes more popular with SMEs
There are several noteworthy trends in the cloud computing market that AWS can leverage to its advantage:
# Businesses look towards multi-cloud solutions
# The cloud gaming market is expanding


# Growing popularity of the cloud among small and medium-sized enterprises (SMEs).
# Increasing adoption of multi-cloud solutions by businesses.
# Expansion of the cloud gaming market.


Overall, the competition for Amazon across its key segments can be summarised in the below table:
To provide an overview of the competition faced by Amazon in its key segments, the following table summarises the landscape:
{| class="wikitable"
{| class="wikitable"
!Segment of competition
!Segment of competition
Line 156: Line 226:
|Alibaba, Xiaomi, Google, Baidu, Apple, Echo dot
|Alibaba, Xiaomi, Google, Baidu, Apple, Echo dot
|}
|}
== On-going and future Amazon projects ==


=== Renewable energy ===
In September 2022, Amazon publicly committed to addressing global warming, announcing an ambitious renewable energy initiative.<ref><nowiki>https://sustainabilitymag.com/renewable-energy/amazon-announces-71-new-projects-for-renewable-energy</nowiki></ref> The company disclosed plans for 379 new renewable energy projects worldwide, which involve the construction of solar and wind facilities. The goal of these projects is to power approximately 4.6 million homes with renewable energy while transitioning all Amazon business units to 100% renewable energy dependence.


== On-going and future Amazon projects ==
Poland and France were selected for the inaugural projects. In October 2022, Spanish renewable investment platform Q-Energy completed the financing for a solar farm in Poland dedicated to generating electricity for Amazon. That same year, Apollo Power, an Israeli flexible solar module manufacturer, announced a contract with Amazon for its product to be used at a facility in France.
 
=== '''Renewable energy'''<ref><nowiki>https://sustainabilitymag.com/renewable-energy/amazon-announces-71-new-projects-for-renewable-energy</nowiki></ref> ===
In septemebr 2022, Amazon announced that it will help tackle the global warming and will contribute to making the planet more green. With that Amazon announced new 379 renewable energy projects across the globe, where it plans to construct solar and wind panels. The aim is to supply 4.6 million houses with renewable energy while also making sure that the business is 100% renewable energy dependent ie all the business units of Amazon will solely use its own renewable energy. Poland and france were planned to host the first projects, and in October 2022, a spanish renewables investment platform Q-Energy last closed financing for a solar farm in Poland that will generate electricity for Amazon. Similarly, in 2022, Israeli flexible solar module manufacturer Apollo Power announced it will provide its products Amazon to build at one of its facilities in France.  


In 2019, Amazon co-founded The Climate Pledge, further showing its commitment to net-zero carbon world. It aims to reach this status by 2040—10 years ahead of the Paris Agreement.  
In 2019, Amazon underscored its dedication to a net-zero carbon world by co-founding The Climate Pledge. The company aims to achieve net-zero carbon status by 2040, a full decade ahead of the Paris Agreement. As of now, The Climate Pledge has accrued more than 375 signatories, including prominent corporations like IBM, Microsoft, PepsiCo, Siemens, Unilever, Verizon, and Visa.


The Pledge has now over 375 signatories, including IBM, Microsoft, PepsiCo, Siemens, Unilever, Verizon, and Visa. However, it does not stop ther. Amazon partnered with Rivian (EV company) and ordered over 100,000 (to be on streers by 2030) electric vehicles to be doing carbon free delivery, 3,000 of which are already in the streets!
In addition to this, Amazon has initiated a partnership with electric vehicle company Rivian, placing an order for over 100,000 electric vehicles for carbon-free delivery, scheduled to be operational by 2030. Notably, 3,000 of these vehicles are already in service.


[[File:Car1.png]]
[[File:Car1.png]]


[[File:Car2.png]]


=== Project Kuiper and satellite network ===
Amazon's Project Kuiper is a recent venture aiming to address the challenge of costly and complex traditional antenna systems, a difficulty often faced in various regions of the world where access to broadband and mobile networks is limited.<ref><nowiki>https://www.aboutamazon.com/news/innovation-at-amazon/what-is-amazon-project-kuiper</nowiki></ref>


[[File:Car2.png]]
The project involves the deployment of a satellite network intended to provide broadband and internet connectivity to these underserved areas. The function of this system is predicated upon households purchasing a "customer terminal," which serves as a connection point to the satellite network.


=== '''Project Kuiper and sattelite network'''<ref><nowiki>https://www.aboutamazon.com/news/innovation-at-amazon/heres-your-first-look-at-project-kuipers-low-cost-customer-terminals</nowiki></ref> ===
The customer terminal, as compared to conventional antennas, is lighter, less expensive, and simpler to install, as per the information provided. Once purchased and set up, this terminal enables households to connect to the overhead satellite network, thereby facilitating internet access.
Project Kuiper is yet another act of Amazon on the way of completely changing the world. Amazon identified a problem where traditional antennas can be expensive, hard and heavy to construct, making it difficult for certain regions in the world to access broadband or mobile network. Amazon’s Project Kuiper<ref><nowiki>https://www.aboutamazon.com/news/innovation-at-amazon/what-is-amazon-project-kuiper</nowiki></ref> is a solution to this problem. The project is a satellite network which will help people access broadband and internet. The way it works is that a household purchases one of the antennas, referred to as “customer terminal” (which is cheaper, lighter and easier to install) from the below pictures and connects it to the satellites above (in the sky).


Below table will shows the comparison between three customer terminals.<ref><nowiki>https://www.aboutamazon.com/news/innovation-at-amazon/amazons-project-kuiper-satellites-will-fly-on-the-new-vulcan-centaur-rocket-in-early-2023</nowiki></ref>
The following table provides a comparative analysis of three distinct customer terminals.
{| class="wikitable"
{| class="wikitable"
!Customer terminal type:
!Customer terminal type:
Line 203: Line 275:
|}
|}
[[File:11.png]]
[[File:11.png]]


Terminals for residential and small business customers
Terminals for residential and small business customers


[[File:333.png]]
[[File:333.png]]


Ultra compact terminal
Ultra compact terminal


[[File:Image12.png]]
[[File:Image12.png]]


A high-bandwidth design for the most demanding needs
A high-bandwidth design for the most demanding needs


[[File:Image3333.png]]
[[File:Image3333.png]]
=== Amazon industrial innovation fund<ref><nowiki>https://www.aboutamazon.com/news/innovation-at-amazon/introducing-the-1-billion-amazon-industrial-innovation-fund</nowiki></ref> ===
In April 2022, Amazon announced the creation of a USD 1 billion platform, dubbed the "Amazon Industrial Innovation Fund". This venture capital-style fund is designed with a focus on bettering the company's operations, enhancing logistics, improving delivery speeds, and advancing the experience for warehouse and logistics employees.


The aim of the fund is to invest in non-Amazon owned companies that can contribute significantly to improvements in delivery speed and employee experience within the logistics and warehousing industries.


 
The initial round of investments is targeted towards technology and safety wear ventures, with further details provided below:
=== '''Amazon industrial innovation fund'''<ref><nowiki>https://www.aboutamazon.com/news/innovation-at-amazon/introducing-the-1-billion-amazon-industrial-innovation-fund</nowiki></ref> ===
In april of 2022, Amazon committed to create a USD 1 billion “venture capital” like platform called Amazon industrial innovation fund. The aim of such fund is to ultimately improve its operations, logistics, speed of parcel deliveries and simply take Amazon to a new level. The “fund” will invest in companies (not owned by Amazon) that incrementally enhance delivery speed and further improve the experience of employees working in warehousing and logistics fields.
 
The first round of investments of the round involves tech and safety wearing ventures which are summarised below:
 
{| class="wikitable"
{| class="wikitable"
!Investee
!Investee
Line 252: Line 319:
|}
|}


=== Amazon lending: ===
=== Amazon lending ===
Complementary to Amazon lending there are plans to further enhance the lending busieness in a partnership with Goldman Sachs. Frankly the lending operations of Amazon, started back in 2016, but have not been very popular, though were increasing over the years. As of December 2022, Amazon has over USD863m of outstanding loans on its books, where the interests are chanrged anywhere between 6% and 17% on the outstanding balance.   
Amazon, which began its lending operations in 2016, is considering a partnership with Goldman Sachs to expand this facet of its business. As of December 2022, Amazon had over USD 863 million in outstanding loans, with interest rates levied between 6% and 17% on the remaining balance.   
 
This potential collaboration is enabled by the "Open Banking" regulation, a set of rules implemented by the European Union in 2019. The regulation permits financial institutions to share critical financial information, such as credit histories, with technology companies.


The possibility of such a venture became possible after the “Open Banking” rule (new set of EU banking rules in power since 2019), which allows banks to share financial information such as the credit history with tech companies. Until now, although Amazon has lots of information about the clients, it does not have any access to the credit history of clients, making it hard for Amazon to properly analyse the credit risk. This partneship will clearly reduce this gap and will help Amazon to reach another high.  
Amazon, despite having abundant customer data, does not possess direct access to clients' credit histories. This information is crucial in assessing credit risk and lending viability. A partnership with Goldman Sachs would fill this gap by providing Amazon access to this important data, potentially enhancing its lending operations.


The impact of such a venture for SMEs is favourable. The reason is that the market has already seen instances when e-commerce platforms partnered with financial services platforms to provide access to capital to SMEs. Increased competition is likely to enhance the services for small sellers.
It's important to note that previous instances have shown e-commerce platforms collaborating with financial service providers to offer capital to SMEs. However, the actual impact of this proposed venture on small and medium-sized businesses would depend on various factors including competition and market conditions, and thus cannot be precisely predicted at this point.


== Team<ref>https://ir.aboutamazon.com/officers-and-directors/default.aspx</ref> ==
== Team<ref>https://ir.aboutamazon.com/officers-and-directors/default.aspx</ref> ==
Line 264: Line 333:


==== Executive Chairman ====
==== Executive Chairman ====
[[File:Image11111111111333333333.png|left|thumb]]Jeff Bezos, the visionary founder of Amazon.com, aims to be Earth's most customer-centric company. With competitive prices, fast delivery, and a vast product range, Amazon delivers exceptional value. It also offers Prime Video for streaming movies and TV shows and popular devices like Kindle, Fire, Echo, and Alexa. Additionally, Amazon Web Services provides cloud computing infrastructure in over 190 countries.  
[[File:Image11111111111333333333.png|left|thumb]]Jeff Bezos is the visionary founder of Amazon.com.


Bezos is also the founder of Blue Origin, focusing on reducing space travel costs and enhancing safety. He owns The Washington Post and is known for his philanthropy. The Bezos Earth Fund supports conservation efforts, while The Bezos Day One Fund helps homeless families and establishes preschools in underserved communities.  
Bezos is also the founder of Blue Origin, focusing on reducing space travel costs and enhancing safety. He owns The Washington Post and is known for his philanthropy. The Bezos Earth Fund supports conservation efforts, while The Bezos Day One Fund helps homeless families and establishes preschools in underserved communities.  


Educated at Princeton University, Bezos graduated with honors 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]]     
Line 284: Line 350:
   
   
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]]   
Line 300: Line 363:
'''Beneficial owners'''
'''Beneficial owners'''


As of the 2023 Proxy Statement<ref>https://s2.q4cdn.com/299287126/files/doc_financials/2023/ar/Amazon-2023-Proxy-Statement.pdf</ref>, sole voting and investment power is granted to individuals who serve as directors and/or executive officers, the directors and executive officers as a group, and individuals and organisations that own 5% or more of the total common stock. The beneficial owners list was released as following:
As of the 2023 Proxy Statement<ref>https://s2.q4cdn.com/299287126/files/doc_financials/2023/ar/Amazon-2023-Proxy-Statement.pdf</ref>, individuals who serve as directors and/or executive officers, the collective group of directors and executive officers, and individuals and organizations that own 5% or more of the total common stock have been granted sole voting and investment power. The beneficial owners list has been released as follows:
{| class="wikitable"
{| class="wikitable"
|+
|+
Line 386: Line 449:


== <big>Corporate Strategy</big> ==
== <big>Corporate Strategy</big> ==
'''Infrastructure Development''': Amazon has heavily invested in building a robust infrastructure to support its vast operations. The company has established a global network of fulfilment centres strategically located to ensure efficient order fulfilment and fast delivery to customers. These fulfilment centres are equipped with advanced technologies, including robotics and automation, to optimize operational efficiency and minimize processing times. Additionally, Amazon has developed data centres worldwide to support its cloud computing services offered through Amazon Web Services (AWS).  
'''Infrastructure Development'''  
 
Amazon has heavily invested in building a robust infrastructure to support its vast operations. The company has established a global network of fulfilment centres strategically located to ensure efficient order fulfilment and fast delivery to customers. These fulfilment centres are equipped with advanced technologies, including robotics and automation, to optimize operational efficiency and minimize processing times. Additionally, Amazon has developed data centres worldwide to support its cloud computing services offered through Amazon Web Services (AWS).  
 
'''Logistics Capabilities'''
 
Amazon has developed a highly efficient and scalable logistics network to support its extensive product range and ensure timely delivery. The company operates its fleet of delivery vehicles, including vans and trucks, to handle last-mile deliveries and manage its logistics operations effectively. Furthermore, Amazon has expanded its logistics capabilities through partnerships with third-party logistics providers and the establishment of its delivery service, Amazon Logistics. This enables Amazon to have greater control over its delivery process and enhance the customer experience.
 
'''Physical Assets'''


'''Logistics Capabilities''': Amazon has developed a highly efficient and scalable logistics network to support its extensive product range and ensure timely delivery. The company operates its fleet of delivery vehicles, including vans and trucks, to handle last-mile deliveries and manage its logistics operations effectively. Furthermore, Amazon has expanded its logistics capabilities through partnerships with third-party logistics providers and the establishment of its delivery service, Amazon Logistics. This enables Amazon to have greater control over its delivery process and enhance the customer experience.  
In addition to its digital presence, Amazon has made tangible investments in physical assets to support its business operations. This includes the acquisition of Whole Foods Market, a prominent grocery store chain, which provides Amazon with a physical retail footprint and strengthens its position in the grocery industry. Amazon has also established physical stores, such as Amazon Go and Amazon 4-star, to create immersive shopping experiences and extend its reach to offline customers.  


'''Physical Assets''': In addition to its digital presence, Amazon has made tangible investments in physical assets to support its business operations. This includes the acquisition of Whole Foods Market, a prominent grocery store chain, which provides Amazon with a physical retail footprint and strengthens its position in the grocery industry. Amazon has also established physical stores, such as Amazon Go and Amazon 4-star, to create immersive shopping experiences and extend its reach to offline customers.
'''Strategic Acquisitions'''  


'''Strategic Acquisitions''': Amazon has pursued strategic acquisitions to expand its capabilities, enter new markets, and gain a competitive edge. Notable acquisitions include the purchase of Ring, a home security company specializing in smart doorbells and cameras, and Twitch, a popular live streaming platform for gaming and creative content. These acquisitions have allowed Amazon to diversify its offerings, integrate innovative technologies into its ecosystem, and tap into new customer segments.  
Amazon has pursued strategic acquisitions to expand its capabilities, enter new markets, and gain a competitive edge. Notable acquisitions include the purchase of Ring, a home security company specializing in smart doorbells and cameras, and Twitch, a popular live streaming platform for gaming and creative content. These acquisitions have allowed Amazon to diversify its offerings, integrate innovative technologies into its ecosystem, and tap into new customer segments.  


Amazon's tangible assets and investments play a crucial role in supporting its corporate strategy and ensuring the delivery of exceptional customer experiences. The company's infrastructure, logistics capabilities, physical assets, and strategic acquisitions all contribute to its market leadership and growth. By continually investing in tangible resources, Amazon strengthens its operational efficiency, expands its market reach, and enhances its competitive advantage. As Amazon continues to innovate and adapt to evolving customer needs, its tangible assets will remain key drivers of its success in the highly competitive e-commerce landscape.  
Amazon's tangible assets and investments play a crucial role in supporting its corporate strategy and ensuring the delivery of exceptional customer experiences. The company's infrastructure, logistics capabilities, physical assets, and strategic acquisitions all contribute to its market leadership and growth. By continually investing in tangible resources, Amazon strengthens its operational efficiency, expands its market reach, and enhances its competitive advantage. As Amazon continues to innovate and adapt to evolving customer needs, its tangible assets will remain key drivers of its success in the highly competitive e-commerce landscape.  
Line 421: Line 492:
|'''31/12/1997'''
|'''31/12/1997'''
|$148
|$148
| -$31
|style="color: red;" |-$31
|$149
|$149
|614
|614
Line 428: Line 499:
|'''31/12/1998'''
|'''31/12/1998'''
|$610
|$610
| -$125
|style="color: red;" |-$125
|$648
|$648
|2,100
|2,100
Line 435: Line 506:
|'''31/12/1999'''
|'''31/12/1999'''
|$1,640
|$1,640
| -$720
|style="color: red;" |-$720
|$2,466
|$2,466
|7,600
|7,600
Line 442: Line 513:
|'''31/12/2000'''
|'''31/12/2000'''
|$2,762
|$2,762
| -$1,411
|style="color: red;" |-$1,411
|$2,135
|$2,135
|9,000
|9,000
Line 449: Line 520:
|'''31/12/2001'''
|'''31/12/2001'''
|$3,122
|$3,122
| -$567
|style="color: red;" |-$567
|$1,638
|$1,638
|7,800
|7,800
Line 456: Line 527:
|'''31/12/2002'''
|'''31/12/2002'''
|$3,933
|$3,933
| -$149
|style="color: red;" |-$149
|$1,990
|$1,990
|7,500
|7,500
Line 526: Line 597:
|'''31/12/2012'''
|'''31/12/2012'''
|$61,093
|$61,093
| -$39
|style="color: red;" |-$39
|$32,555
|$32,555
|88,400
|88,400
Line 540: Line 611:
|'''31/12/2014'''
|'''31/12/2014'''
|$88,988
|$88,988
| -$241
|style="color: red;" |-$241
|$54,505
|$54,505
|154,100
|154,100
Line 596: Line 667:
|'''31/12/2022'''
|'''31/12/2022'''
|$513,983
|$513,983
| -$5,936
|style="color: red;" |-$5,936
|$462,675
|$462,675
|1,541,000
|1,541,000
|}
|}
[[File:Revenues,_net_profits_and_total_assets_plot.png]]
[[File:Revenues,_net_profits_and_total_assets_plot.png]]


=== Forward ===
=== Forward ===
Line 626: Line 696:
|129,953
|129,953
|502,415
|502,415
|'''10651.307'''
|'''10,651'''
| -4995.60
|style="color: red;" |(4,996)
|26298.21
|26,298
|-
|-
|2024
|2024
Line 634: Line 704:
|141,856
|141,856
|517,310
|517,310
|'''10001.486'''
|'''10,001'''
| -5771.10
|style="color: red;" |(5,771)
|25774.07
|25,774
|-
|-
|2025
|2025
Line 642: Line 712:
|154,090
|154,090
|532,559
|532,559
|'''10335.191'''
|'''10,335'''
| -5564.04
|style="color: red;" |(5,564)
|26234.43
|26,234
|-
|-
|2026
|2026
Line 650: Line 720:
|215,056
|215,056
|596,563
|596,563
|'''13082.175'''
|'''13,082'''
| -2944.67
|style="color: red;" |(2,945)
|29109.02
|29,109
|-
|-
|2027
|2027
Line 658: Line 728:
|217,829
|217,829
|602,396
|602,396
|'''12965.08'''
|'''12,965'''
| -3190.33
|style="color: red;" |(3,190)
|29120.49
|29,120
|-
|-
|2028
|2028
Line 666: Line 736:
|225,515
|225,515
|613,165
|613,165
|'''14423.065'''
|'''14,423'''
| -1861.86
|style="color: red;" |(1,862)
|30707.99
|30,708
|-
|-
|2029
|2029
Line 674: Line 744:
|243,575
|243,575
|634,330
|634,330
|'''14562.07'''
|'''14,562.07'''
| -1853.31
|style="color: red;" |(1,853)
|30977.45
|30,977
|-
|-
|2030
|2030
Line 682: Line 752:
|268,765
|268,765
|662,648
|662,648
|'''18514.424'''
|'''18,514'''
|1967.66
|1,968
|35061.19
|35,061
|-
|-
|2031
|2031
Line 690: Line 760:
|291,472
|291,472
|688,504
|688,504
|'''19926.654'''
|'''19,927'''
|3247.58
|3,248
|36605.73
|36,606
|-
|-
|2032
|2032
Line 698: Line 768:
|258,146
|258,146
|658,349
|658,349
|'''16926.32'''
|'''16,926'''
|114.02
|114.02
|33738.62
|33,739
|}
|}
[[File:RevenuesForecast.png|left|thumb|1200x1200px]]
[[File:NetProfitForecacst.png|1200x1200px]]
[[File:NetProfitForecacst.png|1200x1200px]]


== Risks related to growing business ==
=== Intense Competition ===
Amazon has competitors across geographies and industries- retail (physical, e-commerce, omni-channel), computing services (both web and infrastructure), electronic devices, digital content, grocery etc.
=== Expansion into newer market segments ===
There could be a possibility of failure to recoup investments in new technologies, products, or services. This is because of the limited or no experience in these areas.  
== Risks related to operations  ==
=== International Expansion ===
There are several factors like government restrictions/ regulations, physical and technological infrastructure, income levels, geopolitical events etc. which pose a threat to significant revenues and profits from the international market. Amazon has no first-to-market advantage in some geographies and little operating experience in others. For example, regulations in the two biggest Asian markets- India and China are quite restrictive to Amazon’s business activities. Violation of these regulations may result in heavy penalties or revocation of licences. They also face threats from more established local companies and brands.
=== Fluctuation in Demand ===
Variability in Amazon’s retail business because of seasonality, promotions, unforeseen economic, climate and geopolitical events place increased strain on operations. The risks related to fulfilment network optimisation and inventory are magnified during periods of high demand. This results in high fluctuations in operating results and growth rate.
=== Technological Risks (data loss, security breaches, system interruption, lack of redundancy) ===
Because a lot of sensitive and confidential information is collected, processed, stored and transmitted by Amazon, failure to prevent data loss, theft, and misuse could lead to litigation liability, and regulatory action, discouraging its customers and vendors to use the platform, and could harm the business reputation.  
Furthermore, any event that could prevent Amazon from accepting and fulfilling customer orders and providing services, due to system interruption, delays etc. Can make its product and service offerings less attractive and subject to liability.
=== Strategic Alliances, Commercial Agreements, Supplier and other Business Relationships ===
Violations by suppliers or other vendors of applicable laws, regulations, contractual terms, intellectual property rights of others, or Supply Chain Standards, as well as products or practices regarded as unethical, unsafe, or hazardous, could expose Amazon to claims, damage their reputation, limit our growth, and negatively affect our operating results. A point to be noted is that there are limited or single sources of supply in some cases.
Additionally, these arrangements are complex and require substantial infrastructure capacity, personnel, and other resource commitments, which may limit the amount of business Amazon can service. They may not be able to implement, maintain, and develop the components of these commercial relationships, which creates additional risk.
=== Risks related to inventory and payments ===
There are several inventory risk factors that may adversely affect the operating results . Some of these are rapid changes in product cycles and pricing, defective merchandise, changes in customer demand and consumer spending patterns, changes in consumer tastes with respect to products offered, spoilage, new product launches. Additionally, certain goods or components require significant lead time and prepayment which may not be returnable. They also carry significant inventory levels of certain products, like consumer electronics, and are sometimes unable to sell products in sufficient quantity or to meet demand during relevant selling seasons.
For existing and future payment options they offer to their customers, Amazon currently is subject to, and may become subject to additional, regulations and compliance requirements (including obligations to implement enhanced authentication processes that could result in significant costs and reduce the ease of use of their payments products), as well as fraud. For certain payment methods, including credit and debit cards, they pay interchange and other fees, which may increase over time and raise their operating costs and lower profitability.
== Valuation ==
We employed a Discounted Cash Flow (DCF) model to arrive at an intrinsic valuation for Amazon. Furthermore, we utilized a trading comparable analysis to generate a relative valuation.
=== DCF ===
We obtained the average year-on-year growth rate by using revenue figures from 2018 to 2022. This growth rate was then utilised to project the expected revenues from 2023 to 2027. In a similar fashion, we used the average growth in taxes (as a percentage of EBIT) from the past years to forecast future taxes. As for other financial statement components, their growth was analysed and forecasted as a percentage of the projected revenue.
{| class="wikitable"
|+
! ''$ million''
! colspan="5" |''Historical''
! colspan="5" |''Projected''
|-
!'''Income Statement''' <ref name=":1">https://www.wsj.com/market-data/quotes/AMZN/financials/annual/income-statement</ref>
!'''2018'''
!'''2019'''
!'''2020'''
!'''2021'''
!'''2022'''
!'''2023'''
!'''2024'''
!'''2025'''
!'''2026'''
!'''2027'''
|-
|Revenue
|232,887
|280,522
|386,064
|469,822
|513,983
|565,381
|630,400
|693,440
|780,120
|873,735
|-
|''% growth''
| -
|20.45%
|37.62%
|21.70%
|9.40%
|10.00%
|11.50%
|10.00%
|12.50%
|12.00%
|-
| colspan="11" |
|-
|EBIT
|25,330
|30,457
|39,572
|48,362
|39,039
|49,162
|61,750
|75,553
|93,578
|114,419
|-
|''% revenue''
|11%
|11%
|10%
|10%
|8%
|9%
|10%
|11%
|12%
|13%
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Profit
|10,073
|11,588
|21,331
|33,364
|style="color: red;" | -2,722
|style="color: red;" | -42
|5,519
|12,375
|22,421
|35,217
|-
|''% revenue''
|4%
|4%
|6%
|7%
|style="color: red;" | -1%
|0%
|1%
|2%
|3%
|4%
|-
| colspan="11" |
|-
!'''Cash Flow items''' <ref>https://www.wsj.com/market-data/quotes/AMZN/financials/annual/cash-flow</ref>
!
!
!
!
!
!
!
!
!
!
|-
|D&A
|12,613
|15,715
|16,748
|23,421
|25,528
|37,084
|43,325
|49,566
|56,587
|63,664
|-
|% of PPE
|13%
|11%
|8%
|8%
|7%
|9%
|9%
|9%
|9%
|9%
|-
| colspan="11" |
|-
|Net Operating Cash Flow
|30,723
|38,514
|66,064
|46,327
|46,752
|55,554
|80,778
|95,548
|116,789
|139,190
|-
|Net Investing Cash Flow
|style="color: red;" | -12,369
|style="color: red;" | -24,281
|style="color: red;" | -59,611
|style="color: red;" | -58,154
|style="color: red;" | -37,601
|style="color: red;" | -67,097
|style="color: red;" | -74,744
|style="color: red;" | -75,285
|style="color: red;" | -84,545
|style="color: red;" | -85,815
|-
|Net Financing Cash Flow
|style="color: red;" | -7,686
|style="color: red;" | -10,066
|style="color: red;" | -1,104
|6,291
|9,718
|style="color: red;" | -936
|1,064
|1,064
|1,064
|1,064
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Cash, BOP
| -
|32,176
|36,413
|42,380
|36,480
|54,256
|41,777
|48,876
|70,204
|103,512
|-
|Net Change in Cash
|10,317
|4,237
|5,967
|style="color: red;" | -5,900
|17,776
|style="color: red;" | -12,479
|7,099
|21,328
|33,309
|54,439
|-
|Cash, EOP
|32,176
|36,413
|42,380
|36,480
|54,256
|41,777
|48,876
|70,204
|103,512
|157,952
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Net Operating Cash Flows*
|30,723
|38,514
|66,064
|46,327
|46,752
|55,554
|80,778
|95,548
|116,789
|139,190
|-
|CAPEX
|style="color: red;" | -11,323
|style="color: red;" | -12,689
|style="color: red;" | -35,044
|style="color: red;" | -55,396
|style="color: red;" | -58,321
|style="color: red;" | -57,721
|style="color: red;" | -64,650
|style="color: red;" | -64,415
|style="color: red;" | -72,837
|style="color: red;" | -73,202
|-
|Free Cash Flow
|19,400
|25,825
|31,020
|style="color: red;" | -9,069
|style="color: red;" | -11,569
|style="color: red;" | -2,168
|16,128
|31,133
|43,952
|65,988
|-
| colspan="11" |Note: Net Operating Cash Flows incorporate the effect of Depreciation and Amortisation and changes in Net Working Capital.
|}
Sources suggest a terminal growth rate within the 3-5% range<ref name=":2">https://valueinvesting.io/AMZN/valuation/dcf-growth-exit-5y</ref>. The DCF model employs an estimate of 3%, 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 $1.199 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%<ref name=":3">[https://ycharts.com/indicators/5_year_treasury_rate#:~:text=5%20Year%20Treasury%20Rate%20(I%3A5YTCMR)&text=5%20Year%20Treasury%20Rate%20is,long%20term%20average%20of%203.74%25. https://ycharts.com/indicators/5_year_treasury_rate#:~:text=5%20Year%20Treasury%20Rate%20(I%3A5YTCMR)&text=5%20Year%20Treasury%20Rate%20is,long%20term%20average%20of%203.74%25.]</ref>. 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.
{| class="wikitable"
!Input name
!Input value
!Reasons
|-
|Risk free rate
|3.87%
|US 5 year Treasury note rate <ref name=":3" />
|-
|Market risk premium
|4.70%
|Analysts expectations <ref name=":4" />
|-
|Levered beta
|0.88
|Analysts expectations <ref name=":5" />
|-
|Cost of equity
|8.01%
|CAPM model
|-
|Cost of debt
|5.25%
|US typical debt rate <ref name=":6" />
|-
|Internally calculated WACC
|7.74%
|Calculated using the WACC formula from above estimates
|-
|Terminal growth rate
|3%
|Analysts expectations <ref name=":2" />
|}
The market risk premium fluctuates between 4.2% and 5.2% <ref name=":4">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 name=":5">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 name=":6">[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%.
DCF calculation incorporates the H-model with an underlying assumption that starting from 2027 Amazon's free cash flows will grow by 7% until until 2037 where the terminal growth of cash flows will be 3%. The H-model assumes a smooth transition between the two stage of Amazon lifecycle. In the process of discounting the future Free Cash Flow to its present value, the WACC serves as the discount factor. This calculation leads to a share price of $138.23, a summary of which is presented in the table below.
{| class="wikitable"
!Metric
!Metric value
|-
|WACC
|7.96%
|-
|Short term Growth
|7%
|-
|Long term growth
|3%
|-
|H terminal value
|1,758,880
|-
|PV of terminal value
|1,199,300
|-
|PV of all future cash flows
|1,326,882
|-
|Number of years
|10
|-
|Cash
|54,253
|-
|Debt
|140,118
|-
|Equity
|1,412,747
|-
|Number of shares outstanding
|10,220
|-
|Fair share price
|138.23
|-
|Current Share Price
|134.30
|}
The closing share price for Amazon stocks on 14th July 2023 stood at $134.40<ref>https://www.marketwatch.com/investing/stock/amzn</ref>.
We conducted a sensitivity analysis using a WACC range of 6.5% to 9.0%, and a terminal growth rate span of 1.5% to 4.0%.
{| class="wikitable"
!
!
! colspan="7" |WACC
|-
!
!
!6.50%
!7.00%
!7.50%
!7.74%
!8.00%
!8.50%
!9.00%
|-
! rowspan="6" |Terminal growth rate
!1.5%
|$          152.25
|$        137.38
|$        125.02
|$        115.37
|$        114.60
|$        105.70
|$          98.00
|-
!2.0%
|$          164.52
|$        147.00
|$        132.71
|$        121.71
|$        120.84
|$        110.82
|$        102.26
|-
!2.5%
|$          179.85
|$        158.77
|$        141.94
|$        129.21
|$        128.21
|$        116.79
|$        107.16
|-
!3.0%
|$          199.57
|$        173.48
|$        153.22
|$        138.22
|$        137.05
|$        123.86
|$        112.89
|-
!3.5%
|$          225.86
|$        192.38
|$        167.32
|$        149.26
|$        147.86
|$        132.33
|$        119.65
|-
!4.0%
|$          262.67
|$        217.59
|$        185.45
|$        163.08
|$        161.38
|$        142.69
|$        127.77
|}
=== 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>.
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 EV/Revenue ratio serves as an effective tool to determine whether a stock is undervalued or overvalued compared to its industry peers by accounting for the enterprise value and revenue generated by the firm.
The table provides a brief analysis of the ratios and market cap of the several companies in the analysis including their minimum/maximum, median, quartile and mean values.  
In order to consider growth in relative valuation, PEG and growth adjusted EV/Revenue valuation multiples are used. PEG is the ratio of P/E to the annual growth in EPS. Growth adjusted EV/Revenue multiple is the ratio of EV/Revenue to the annual growth in revenue.
{| class="wikitable"
!Name
!P/E <ref>https://finbox.com/NASDAQGS:AMZN/explorer/pe_ltm/</ref>
!EPS 2022 <ref>https://www.macrotrends.net/stocks/charts/AMZN/amazon/eps-earnings-per-share-diluted</ref>
!EPS 2023 <ref name=":7">https://finance.yahoo.com/quote/AMZN/analysis/</ref>
!EPS growth
!PEG
|-
|Amazon.com Inc
|321.8
| -0.27
|1.57
| -681.5%
| -47.22
|-
|MercadoLibre Inc
|92.3
|9.53
|16.69
|75.1%
|122.85
|-
|Etsy Inc
| -16.1 
| -5.48
|2.33
| -142.5%
|11.30
|-
|Chewy Inc
|306.7
|0.12
| -0.01
| -108.3%
| -283.11
|-
|eBay Inc
|39.2 
| -2.27
|3.35
| -247.6%
| -15.83
|-
|Alibaba Group
|23.9
|2.34
|8.52
|264.1%
|9.05
|-
|Vipshop Holdings Ltd
|9.8
|1.43
|1.88
|31.5%
|31.14
|-
|'''Median'''
|'''31.6'''
|'''0.8'''
|'''2.8'''
|'''-38.4%'''
|'''10.2'''
|-
|'''Mean'''
|'''111.1'''
|'''0.8'''
|'''4.9'''
|'''-115.6%'''
|'''-24.5'''
|}
{| class="wikitable"
!Name
!Revenue 2022 <ref>https://www.macrotrends.net/stocks/charts/AMZN/amazon/revenue</ref>
!Revenue 2023 <ref name=":7" />
!Revenue growth
!EV/Revenue
!Growth Adjusted EV/Revenue
|-
|Amazon.com Inc
|514.0
|560.8
|9.1%
|2.9
|31.8
|-
|MercadoLibre Inc
|10.5
|13.5
|28.5%
|5.2
|18.2
|-
|Etsy Inc
|2.6
|2.8
|7.6%
|4.8
|63.5
|-
|Chewy Inc
|10.1
|11.4
|12.7%
|2.0
|15.8
|-
|eBay Inc
|9.8
|10.1
|2.6%
|2.5
|96.0
|-
|Alibaba Group
|126.491
|132.7
|4.9%
|2.5
|50.8
|-
|Vipshop Holdings Ltd
|14.956
|15.8
|5.6%
|2.5
|44.3
|-
|'''Median'''
|'''10.3'''
|'''12.5'''
|'''6.6%'''
|'''2.5'''
|'''47.6'''
|-
|'''Mean'''
|'''98.3'''
|'''106.7'''
|'''10.1%'''
|'''3.2'''
|'''45.8'''
|}
Amazon had a negative annual EPS in 2022 which results in a negative EPS growth and PEG. Therefore, this multiple is not used to obtain a valuation. It has both a high PE and EV/Revenue multiple compared to the industry median, which usually implies that the stock is overvalued.
On the other hand, Amazon has a noticeably lower growth adjusted EV/Revenue multiple (31.8) compared to the industry median (47.6). This results in an implied share price of $211.09, which is significantly higher than the current share price. 


== Appendix ==
== Appendix ==
Line 712: Line 1,406:
|+Balance sheet
|+Balance sheet
!Year end date
!Year end date
!31/12/2018
!31/12/2019
!31/12/2020
!31/12/2021
!31/12/2022
!31/12/2022
!31/12/2021
!31/12/2020
!31/12/2019
!31/12/2018
|-
|-
|'''Current Assets'''
|'''Current Assets'''
Line 726: Line 1,420:
|-
|-
|Cash and Cash Equivalents ($million)
|Cash and Cash Equivalents ($million)
|$31,750
|$36,092
|$42,122
|$36,220
|$53,888
|$53,888
|$36,220
|$42,122
|$36,092
|$31,750
|-
|-
|Marketable securities ($million)
|Marketable securities ($million)
|$9,500
|$18,929
|$42,274
|$59,829
|$16,138
|$16,138
|$59,829
| $42,274
| $18,929
| $9,500
|-
|-
|Inventory ($million)
|Inventory ($million)
|$17,174
|$20,497
|$23,795
|$32,640
|$34,405
|$34,405
|$32,640
|$23,795
|$20,497
|$17,174
|-
|-
|Net Receivables ($million)
|Net Receivables ($million)
|$16,677
|$20,816
|$24,542
|$32,891
|$42,360
|$42,360
|$32,891
|$24,542
|$20,816
|$16,677
|-
|-
|Total Current Assets ($million)
|Total Current Assets ($million)
|$75,101
|$96,334
|$132,733
|$161,580
|$146,791
|$146,791
|$161,580
|$132,733
|$96,334
|$75,101
|-
|-
|'''Long-Term Assets'''
|'''Long-Term Assets'''
Line 768: Line 1,462:
|-
|-
|Net Property and equipment ($million)
|Net Property and equipment ($million)
|$61,797
|$72,705
|$113,114
|$160,281
|$186,715
|$186,715
|$160,281
|$113,114
|$72,705
|$61,797
|-
|-
|Operating leases ($million)
|Operating leases ($million)
| --
|$25,141
|$37,553
|$56,082
|$66,123
|$66,123
|$56,082
|$37,553
|$25,141
| --
|-
|-
|Goodwill ($million)
|Goodwill ($million)
|$14,548
|$14,754
|$15,017
|$15,371
|$20,288
|$20,288
|$15,371
|$15,017
|$14,754
|$14,548
|-
|-
|Other Assets ($million)
|Other Assets ($million)
|$11,202
|$16,314
|$22,778
|$27,235
|$42,758
|$42,758
|$27,235
|$22,778
|$16,314
|$11,202
|-
|-
|Total Assets ($million)
|Total Assets ($million)
|$162,648
|$225,248
|$321,195
|$420,549
|$462,675
|$462,675
|$420,549
|$321,195
|$225,248
|$162,648
|-
|-
|'''Current Liabilities'''
|'''Current Liabilities'''
Line 810: Line 1,504:
|-
|-
|Accounts Payable ($million)
|Accounts Payable ($million)
|$38,192
|$47,183
|$72,529
|$78,664
|$79,600
|$79,600
|$78,664
|$72,529
|$47,183
|$38,192
|-
|-
|Accrued expenses and other ($million)
|Accrued expenses and other ($million)
|$23,663
|$32,439
|$44,138
|$51,775
|$62,566
|$62,566
|$51,775
|$44,138
|$32,439
|$23,663
|-
|-
|Unearned revenue ($million)
|Unearned revenue ($million)
|$6,536
|$8,190
|$9,708
|$11,827
|$13,227
|$13,227
|$11,827
|$9,708
|$8,190
|$6,536
|-
|-
|Total Current Liabilities ($million)
|Total Current Liabilities ($million)
|$68,391
|$87,812
|$126,385
|$142,266
|$155,393
|$155,393
|$142,266
|$126,385
|$87,812
|$68,391
|-
|-
|Long-Term lease liabilities ($million)
|Long-Term lease liabilities ($million)
|$9,650
|$39,791
|$52,573
|$67,651
|$72,968
|$72,968
|$67,651
|$52,573
|$39,791
|$9,650
|-
|-
|Long-Term Debt ($million)
|Long-Term Debt ($million)
|$23,495
|$23,414
|$31,816
|$48,744
|$67,150
|$67,150
|$48,744
|$31,816
|$23,414
|$23,495
|-
|-
|Other Liabilities ($million)
|Other Liabilities ($million)
|$17,563
|$12,171
|$17,017
|$23,643
|$21,121
|$21,121
|$23,643
|$17,017
|$12,171
|$17,563
|-
|-
|Total Liabilities ($million)
|Total Liabilities ($million)
|$119,099
|$163,188
|$227,791
|$282,304
|$316,632
|$316,632
|$282,304
|$227,791
|$163,188
|$119,099
|-
|-
|'''Stock Holders Equity'''
|'''Stock Holders Equity'''
Line 873: Line 1,567:
|-
|-
|Common Stocks ($million)
|Common Stocks ($million)
|$108
|$106
|$5
|$5
|$5
|$5
|$5
|$5
|$106
|$108
|-
|-
|Capital Surplus ($million)
|Capital Surplus ($million)
|$26,791
|$33,658
|$42,865
|$55,437
|$75,066
|$75,066
|$55,437
|$42,865
|$33,658
|$26,791
|-
|-
|Retained Earnings
|Retained Earnings
|$19,625
|$31,220
|$52,551
|$85,915
|$83,193
|$83,193
|$85,915
|$52,551
|$31,220
|$19,625
|-
|-
|Treasury Stock ($million)
|Treasury Stock ($million)
| -$7,837
|style="color: red;" |-$1,837
| -$1,837
|style="color: red;" |-$1,837
| -$1,837
|style="color: red;" |-$1,837
| -$1,837
|style="color: red;" |-$1,837
| -$1,837
|style="color: red;" |-$7,837
|-
|-
|Other Equity ($million)
|Other Equity ($million)
| -$4,487
|style="color: red;" |-$1,035
| -$1,376
|style="color: red;" |-$986
| -$180
|style="color: red;" |-$180
| -$986
|style="color: red;" |-$1,376
| -$1,035
|style="color: red;" |-$4,487
|-
|-
|Total Equity ($million)
|Total Equity ($million)
|$43,549
|$62,060
|$93,404
|$138,245
|$146,043
|$146,043
|$138,245
|$93,404
|$62,060
|$43,549
|-
|-
|Total Liabilities & Equity ($million)
|Total Liabilities & Equity ($million)
|$162,648
|$225,248
|$321,195
|$420,549
|$462,675
|$462,675
|$420,549
|$321,195
|$225,248
|$162,648
|}
|}
{| class="wikitable"
{| class="wikitable"
|+Cash flow
|+Cash flow
!Year end date
!Year end date
!31/12/2018
!31/12/2019
!31/12/2020
!31/12/2021
!31/12/2022
!31/12/2022
!31/12/2021
!31/12/2020
!31/12/2019
!31/12/2018
|-
|-
|Net Income ($million)
|Net Income ($million)
|$10,073
|$11,588
|$21,331
|$33,364
| -$2,722
| -$2,722
|$33,364
|$21,331
|$11,588
|$10,073
|-
|-
|'''Cash Flows-Operating Activities'''
|'''Cash Flows-Operating Activities'''
Line 945: Line 1,639:
|-
|-
|Depreciation ($million)
|Depreciation ($million)
|$15,341
|$21,789
|$25,180
|$34,433
|$41,921
|$41,921
|$34,433
|$25,180
|$21,789
|$15,341
|-
|-
|Net Income Adjustments ($million)
|Net Income Adjustments ($million)
|$6,352
|$7,575
|$6,072
|style="color: red;" |-$1,859
|$28,439
|$28,439
| -$1,859
|$6,072
|$7,575
|$6,352
|-
|-
|'''Changes in Operating Activities'''
|'''Changes in Operating Activities'''
Line 966: Line 1,660:
|-
|-
|Changes in Inventories ($million)
|Changes in Inventories ($million)
| -$2,592
|style="color: red;" |-$1,314
| -$9,487
|style="color: red;" |-$3,278
| -$2,849
|style="color: red;" |-$2,849
| -$3,278
|style="color: red;" |-$9,487
| -$1,314
|style="color: red;" |-$2,592
|-
|-
|Accounts Receivable ($million)
|Accounts Receivable ($million)
| -$21,897
|style="color: red;" |-$4,615
| -$18,163
|style="color: red;" |-$7,681
| -$8,169
|style="color: red;" |-$8,169
| -$7,681
|style="color: red;" |-$18,163
| -$4,615
|style="color: red;" |-$21,897
|-
|-
|Accounts Payable ($million)
|Accounts Payable ($million)
|$3,263
|$8,193
|$17,480
|$3,602
|$2,945
|$2,945
|$3,602
|$17,480
|$8,193
|$3,263
|-
|-
|Other Operating Activities ($million)
|Other Operating Activities ($million)
|$1,623
|$328
|$7,019
|$4,437
|$658
|$658
|$4,437
|$7,019
|$328
|$1,623
|-
|-
|Net Cash Flow-Operating ($million)
|Net Cash Flow-Operating ($million)
|$30,723
|$38,514
|$66,064
|$46,327
|$46,752
|$46,752
|$46,327
|$66,064
|$38,514
|$30,723
|-
|-
|'''Cash Flows-Investing Activities'''
|'''Cash Flows-Investing Activities'''
Line 1,008: Line 1,702:
|-
|-
|Capital Expenditures ($million)
|Capital Expenditures ($million)
| -$58,321
|style="color: red;" |-$11,323
| -$55,396
|style="color: red;" |-$12,689
| -$35,044
|style="color: red;" |-$35,044
| -$12,689
|style="color: red;" |-$55,396
| -$11,323
|style="color: red;" |-$58,321
|-
|-
|Investments ($million)
|Investments ($million)
| -$2,565
|style="color: red;" |-$7,100
| -$60,157
|style="color: red;" |-$31,812
| -$72,479
|style="color: red;" |-$72,479
| -$31,812
|style="color: red;" |-$60,157
| -$7,100
|style="color: red;" |-$2,565
|-
|-
|Other Investing Activities ($million)
|Other Investing Activities ($million)
|$6,054
|$20,220
|$47,912
|$57,399
|$23,285
|$23,285
|$57,399
|$47,912
|$20,220
|$6,054
|-
|-
|Net Cash Flows-Investing ($million)
|Net Cash Flows-Investing ($million)
| -$37,601
|style="color: red;" |-$12,369
| -$58,154
|style="color: red;" |-$24,281
| -$59,611
|style="color: red;" |-$59,611
| -$24,281
|style="color: red;" |-$58,154
| -$12,369
|style="color: red;" |-$37,601
|-
|-
|'''Cash Flows-Financing Activities'''
|'''Cash Flows-Financing Activities'''
Line 1,043: Line 1,737:
|-
|-
|Proceeds from short-term debt ($million)
|Proceeds from short-term debt ($million)
|$886
|$1,402
|$6,796
|$7,956
|$41,553
|$41,553
|$7,956
|$6,796
|$1,402
|$886
|-
|-
|Repayments of short-term debt ($million)
|Repayments of short-term debt ($million)
| -$37,554
|style="color: red;" |-$813
| -$7,753
|style="color: red;" |-$1,518
| -$6,177
|style="color: red;" |-$6,177
| -$1,518
|style="color: red;" |-$7,753
| -$813
|style="color: red;" |-$37,554
|-
|-
|Proceeds from long-term debt ($million)
|Proceeds from long-term debt ($million)
|$182
|$871
|$10,525
|$19,003
|$21,166
|$21,166
|$19,003
|$10,525
|$871
|$182
|-
|-
|Repayments of long-term debt ($million)
|Repayments of long-term debt ($million)
| -$1,258
|style="color: red;" |-$155
| -$1,590
|style="color: red;" |-$1,166
| -$1,553
|style="color: red;" |-$1,553
| -$1,166
|style="color: red;" |-$1,590
| -$155
|style="color: red;" |-$1,258
|-
|-
|Other financing activities ($million)
|Other financing activities ($million)
| -$8,189
|style="color: red;" |-$7,786
| -$11,325
|style="color: red;" |-$9,655
| -$10,695
|style="color: red;" |-$10,695
| -$9,655
|style="color: red;" |-$11,325
| -$7,786
|style="color: red;" |-$8,189
|-
|-
|Net Cash Flows-Financing ($million)
|Net Cash Flows-Financing ($million)
|style="color: red;" |-$7,686
|style="color: red;" |-$10,066
|style="color: red;" |-$1,104
|$6,291
|$9,718
|$9,718
|$6,291
| -$1,104
| -$10,066
| -$7,686
|-
|-
|Effect of Exchange Rate ($million)
|Effect of Exchange Rate ($million)
| -$351
|style="color: red;" |-$1,093
|style="color: red;" |-$364
|$618
|$70
|$70
|$618
|style="color: red;" |-$351
| -$364
| -$1,093
|-
|-
|Net Cash Flow ($million)
|Net Cash Flow ($million)
|$10,317
|$4,237
|$5,967
|style="color: red;" |-$5,900
|$17,776
|$17,776
| -$5,900
|$5,967
|$4,237
|$10,317
|}
|}
{| class="wikitable"
{| class="wikitable"
|+Income statement
|+Income statement
!Year end date
!Year end date
!31/12/2018
!31/12/2019
!31/12/2020
!31/12/2021
!31/12/2022
!31/12/2022
!31/12/2021
!31/12/2020
!31/12/2019
!31/12/2018
|-
|-
|Total Revenue ($million)
|Total Revenue ($million)
|$232,887
|$280,522
|$386,064
|$469,822
|$513,983
|$513,983
|$469,822
|$386,064
|$280,522
|$232,887
|-
|-
|Cost of Revenue ($million)
|Cost of Revenue ($million)
|$139,156
|$165,536
|$233,307
|$272,344
|$288,831
|$288,831
|$272,344
|$233,307
|$165,536
|$139,156
|-
|-
|'''Gross Profit ($million)'''
|'''Gross Profit ($million)'''
|$93,731
|$114,986
|$152,757
|$197,478
|$225,152
|$225,152
|$197,478
|$152,757
|$114,986
|$93,731
|-
|-
|'''Operating Expenses'''
|'''Operating Expenses'''
Line 1,136: Line 1,830:
|-
|-
|Fulfillment ($million)
|Fulfillment ($million)
|$34,027
|$40,232
|$58,517
|$75,111
|$84,299
|$84,299
|$75,111
|$58,517
|$40,232
|$34,027
|-
|-
|Technology and content ($million)
|Technology and content ($million)
|$28,837
|$35,931
|$42,740
|$56,052
|$73,213
|$73,213
|$56,052
|$42,740
|$35,931
|$28,837
|-
|-
|Sales, General and admin. ($million)
|Sales, General and admin. ($million)
|$18,150
|$24,081
|$28,676
|$41,372
|$54,129
|$54,129
|$41,372
| $28,676
|$24,081
|$18,150
|-
|-
|Other Operating Items ($million)
|Other Operating Items ($million)
|$296
|$201
|style="color: red;" |-$75
|$62
|$1,263
|$1,263
| $62
| -$75
| $201
| $296
|-
|-
|'''Operating Income'''
|'''Operating Income'''
|$12,421
|$14,541
|$22,899
|$24,879
|$12,248
|$12,248
|$24,879
|$22,899
|$14,541
|$12,421
|-
|-
|Interest income and other
|Interest income and other
| -$15817
|$257
|$1035
|$2926
|$15081
|$15081
|$2926
|style="color: red;" |-$15817
|$1035
|$257
|-
|-
|Earnings Before Interest and Tax
|Earnings Before Interest and Tax
| -$3,569
|$12,678
|$15,576
|$25,825
|$39,960
|$39,960
|$25,825
|style="color: red;" |-$3,569
|$15,576
|$12,678
|-
|-
|Interest Expense
|Interest Expense
| -$2,367
|style="color: red;" |-$1,417
| -$1,809
|style="color: red;" |-$1,600
| -$1,647
|style="color: red;" |-$1,647
| -$1,600
|style="color: red;" |-$1,809
| -$1,417
|style="color: red;" |-$2,367
|-
|-
|Earnings Before Tax
|Earnings Before Tax
| -$5,936
|$11,261
|$13,976
|$24,178
|$38,151
|$38,151
|$24,178
|style="color: red;" |-$5,936
|$13,976
|$11,261
|-
|-
|Net Income Tax
|Net Income Tax
|style="color: red;" |-$1,188
|style="color: red;" |-$2,388
|style="color: red;" |-$2,847
|style="color: red;" |-$4,787
|$3,214
|$3,214
| -$4,787
| -$2,847
| -$2,388
| -$1,188
|-
|-
|'''Net Income'''
|'''Net Income'''
| -$2,722
|$10,073
|$11,588
|$21,331
|$33,364
|$33,364
|$21,331
|style="color: red;" |-$2,722
|$11,588
|$10,073
|-
|-
|'''Net Income Applicable to Common Shareholders'''
|'''Net Income Applicable to Common Shareholders'''
| -$2,722
|$10,073
|$11,588
|$21,331
|$33,364
|$33,364
|$21,331
|style="color: red;" |-$2,722
|$11,588
|$10,073
|}
|}
{| class="wikitable"
{| class="wikitable"
|+Financial ratios
|+Financial ratios
!Year end date
!Year end date
!31/12/2018
!31/12/2019
!31/12/2020
!31/12/2021
!31/12/2022
!31/12/2022
!31/12/2021
!31/12/2020
!31/12/2019
!31/12/2018
|-
|-
| colspan="6" |'''Liquidity Ratios'''
! colspan="6" |Liquidity Ratios
|-
|-
|Current Ratio
|Current Ratio
|94%
|114%
|105%
|110%
|110%
|110%
|110%
|105%
|114%
|94%
|-
|-
|Quick Ratio
|Quick Ratio
|72%
|85%
|91%
|86%
|86%
|86%
|86%
|85%
|91%
|72%
|-
|-
|Cash Ratio
|Cash Ratio
|46%
|41%
|33%
|25%
|35%
|35%
|25%
|33%
|41%
|46%
|-
|-
| colspan="6" |'''Profitability Ratios'''
! colspan="6" |Profitability Ratios
|-
|-
|Gross Margin
|Gross Margin
|44%
|42%
|40%
|40%
|41%
|41%
|40%
|40%
|42%
|44%
|-
|-
|Operating Margin
|Operating Margin
|2%
|5%
|5%
|5%
|6%
|6%
|5%
|5%
|5%
|2%
|-
|-
|Pre-Tax Margin
|Pre-Tax Margin
| -1%
|8%
|6%
|5%
|5%
|5%
|5%
|6%
|8%
| -1%
|-
|-
|Profit Margin
|Profit Margin
| -1%
|7%
|6%
|4%
|4%
|4%
|4%
|6%
|7%
| -1%
|-
|-
|Pre-Tax ROE
|Pre-Tax ROE
| -4%
|28%
|26%
|26%
|23%
|23%
|26%
|26%
|28%
| -4%
|-
|-
|After Tax ROE
|After Tax ROE
| -2%
|24%
|23%
|23%
|19%
|19%
|23%
|23%
|24%
| -2%
|}
|}


All financial data were retrieved from the annual reports that Amazon, Inc released at the end of each financial year.
All financial data were retrieved from the annual reports that Amazon, Inc released at the end of each financial year.
== Valuation ==
DCF (Discounted Cash Flow) model was used to reach an intrinsic valuation for Amazon. Additionally, trading comparable analysis derived a relative valuation.
=== 1. DCF ===
Revenue figures from 2018 to 2022 are used to obtain an average year-on-year growth which can be utilised to project the revenues from 2023 to 2027. Similarly, average growth in taxes as a percentage of EBIT is used to project the taxes. For all other lines of the financial statements, growth is evaluated as a percentage of revenue.  
{| class="wikitable"
|+
| ''$ million''
| colspan="5" |''Historical''
| colspan="5" |''Projected''
|-
!'''Income Statement'''
!'''2018'''
!'''2019'''
!'''2020'''
!'''2021'''
!'''2022'''
!'''2023'''
!'''2024'''
!'''2025'''
!'''2026'''
!'''2027'''
|-
|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%
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|EBIT
|12,717
|14,742
|22,824
|24,941
|13,511
|14,156
|14,832
|15,541
|16,283
|17,061
|-
|''% sales''
|5.46%
|5.26%
|5.91%
|5.31%
|2.63%
|4.78%
|4.78%
|4.78%
|4.78%
|4.78%
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Taxes
|1,197
|2,374
|2,863
|4,791
| -3,217
|(3,410)
|(3,615)
|(3,833)
|(4,063)
|(4,307)
|-
|''% EBIT''
|9.41%
|16.10%
|12.54%
|19.21%
| -23.81%
|6.01%
|6.01%
|6.01%
|6.01%
|6.01%
|-
|
|
|
|
|
|
|
|
|
|
|
|-
!'''Cash Flow items'''
!
!
!
!
!
!
!
!
!
!
|-
|D&A
|15,341
|21,789
|25,251
|34,296
|41,921
|45,040
|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%
|-
|''% of Capex''
| -114.25%
| -129.23%
| -62.91%
| -56.17%
| -65.87%
| -78.54%
| -78.54%
| -78.54%
| -78.54%
| -78.54%
|-
|
|
|
|
|
|
|
|0
|0
|0
|0
|-
|Capex
| -13,427
| -16,861
| -40,140
| -61,053
| -63,645
|(56,996)
|(51,042)
|(45,710)
|(40,935)
|(36,659)
|-
|% of sales
| -5.77%
| -6.01%
| -10.40%
| -12.99%
| -12.38%
| -10.45%
| -10.45%
| -10.45%
| -10.45%
| -10.45%
|-
|
|
|
|
|
|
|
|0
|0
|0
|0
|-
|Changes in NWC
| -1,043
| -2,438
|13,481
| -19,611
| -20,886
|(20,593)
|(20,304)
|(20,019)
|(19,738)
|(19,461)
|-
|''% of sales''
| -0.45%
| -0.87%
|3.49%
| -4.17%
| -4.06%
| -1.40%
| -1.40%
| -1.40%
| -1.40%
| -1.40%
|-
|''% of change in sales''
|
| -5.12%
|12.77%
| -23.41%
| -47.30%
| -15.76%
| -15.76%
| -15.76%
| -15.76%
| -15.76%
|-
|
|
|
|
|
|
|
|
|
|
|
|-
!'''DCF'''
!
!
!
!
!
!
!
!
!
!
|-
|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%
|-
|
|
|
|
|
|
|0
|0
|0
|0
|0
|-
|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%
|-
|
|
|
|
|
|
|0
|0
|0
|0
|0
|-
|Taxes
|1,197
|2,374
|2,863
|4,791
| -3,217
| -3,410
| -3,615
| -3,833
| -4,063
| -4,307
|-
|''% of EBIT''
|9.41%
|16.10%
|12.54%
|19.21%
| -23.81%
|6.01%
|6.01%
|6.01%
|6.01%
|6.01%
|-
|
|
|
|
|
|
|0
|0
|0
|0
|0
|-
!EBIAT
!11,520
!12,368
!19,961
!20,150
!16,728
!17,567
!18,448
!19,374
!20,346
!21,368
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|D&A
|15,341
|21,789
|25,251
|34,296
|41,921
|45,040
|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
| -13,427
| -16,861
| -40,140
| -61,053
| -63,645
|(56,996)
|(51,042)
|(45,710)
|(40,935)
|(36,659)
|-
|''% of slaes''
| -5.77%
| -6.01%
| -10.40%
| -12.99%
| -12.38%
| -10.45%
| -10.45%
| -10.45%
| -10.45%
| -10.45%
|-
|
|
|
|
|
|
|0
|0
|0
|0
|0
|-
|Changes in NWC
| -1,043
| -2,438
|13,481
| -19,611
| -20,886
|(20,593)
|(20,304)
|(20,019)
|(19,738)
|(19,461)
|-
|''% of sales''
| -0.45%
| -0.87%
|3.49%
| -4.17%
| -4.06%
| -1.40%
| -1.40%
| -1.40%
| -1.40%
| -1.40%
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Unlevered FCF
|14,477
|19,734
| -8,409
|13,004
|15,890
|26,203
|36,101
|45,675
|55,010
|64,188
|-
|
|
|
|
|
|
|
|
|
|
|
|-
|Year count
|
|
|
|
|
|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
|}
The terminal growth rate suggested by the sources lies in the range of 3-5%. The DCF uses the average estimate of 4% however the range is considered in the sensitivity analysis. This is used to calculate the terminal value which is discounted to a present terminal value of $ 1,273,771 million.
For a DCF which projects the financials of a US-based company 5 years into the future, US 5-year Treasury rate of 3.87% is used as the risk-free rate. This is the monthly average rate for Jan – July 2023.
The estimates of the DCF are summarised in the table.
{| class="wikitable"
| colspan="2" |Risk free rate  (5 year US Bond):
|3.87%
|-
| colspan="2" |Market risk premium:
|4.70%
|-
| colspan="2" |Levered beta:
|0.88
|-
| colspan="2" |Cost of equity:
|8.01%
|-
| colspan="2" |Cost of debt:
|5.25%
|-
| colspan="2" |Internally calculated WACC:
|7.74%
|-
| colspan="2" |Terminal growth rate:
|4%
|}
The market risk premium ranges from 4.2 – 5.2%, so an average of 4.7% is used. Amazon stock price are considered to be less volatile compared to the overall market, with a beta ranging from 0.64 to 1.12, which averages to 0.88. As a result, the cost of equity is calculated to be 8.01%. In combination with the cost of debt of 5.25%, a WACC of 7.74% is obtained.
While discounting the future FCF to its present value, WACC is used as the discounting factor and the year count starting from 0.52 is used. This leads to a share price of $135.57 as summarised in the table.
{| class="wikitable"
|Enterprise value:
|1457196
|-
|(+) Cash:
|69674
|-
|(-) Debt:
|1.41E+05
|-
|Equity Value:
|1385520
|-
|Shares (millions):
|10,220
|-
|Share Price ($):
|135.57
|}
The closing share price on 6 July, 2023 for Amazon stocks was $128.36.
Sensitivity analysis is conducted for a WACC ranging from 6.5 – 9.0% and for terminal growth rate ranging from 2.5 – 5.0%.
{| class="wikitable"
!
!
!
!
!
!WACC
!
!
!
|-
!
!$        135.57
|6.50%
|7.00%
|7.50%
|7.74%
|8.00%
|8.50%
|9.00%
|-
!
|2.5%
|$        132.60
|$        116.65
|$        103.90
|$          98.62
|$          93.47
|$          84.79
|$          77.45
|-
!Terminal
|3.0%
|$        150.57
|$        130.40
|$        114.72
|$        108.34
|$        102.18
|$          91.93
|$          83.40
|-
!Growth
|3.5%
|$        174.53
|$        148.08
|$        128.24
|$        120.35
|$        112.83
|$        100.50
|$          90.42
|-
!Rate
|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
|}
=== 2. Relative Valuation ===
Trading comparable analysis is conducted to obtain a relative valuation for Amazon in addition to the absolute DCF valuation above. Its key competitors are including in the analysis including Alibaba and Ebay.
{| class="wikitable"
!Name
!Mkt Cap ($ millions)
!EV/EBITDA
!P/E
|-
|AMAZON.COM INC
|1337744.91
|21.36
|140.55
|-
|ALIBABA GROUP HOLDING-SP ADR
|217919.81
|6.96
|13.71
|-
|EBAY INC
|24068.68
|10.02
|14.64
|-
|ALLEGRO.EU SA
|8131.03
|17.73
|#N/A N/A
|-
|ETSY INC
|10503.42
|24.81
|34.45
|-
|VIPSHOP HOLDINGS LTD - ADR
|9115.95
| -
|10.15
|-
|VERKKOKAUPPA.COM OYJ
|128.12
|14.63
| -
|-
|MERCADOLIBRE INC
|62626.96
|34.66
|101.25
|-
|CHEWY INC - CLASS A
|16156.76
|62.47
|302.76
|-
|JD.COM INC-ADR
|55401.57
|10.04
|17.86
|-
|NEXT PLC
|10942.15
|10.67
|11.73
|-
|REVOLVE GROUP INC
|1216.23
|14.35
|22.3
|-
|1-800-FLOWERS.COM INC-CL A
|495.54
|7.2
|55.52
|-
|PDD HOLDINGS INC
|90833.47
| -
|43.91
|-
|ZALANDO SE
|7090.3
|14.32
|178.73
|-
|ZOZO INC
|6250
|14.34
|21.88
|-
!
!
!
!
|-
|Minimum
|128.12
|6.96
|10.15
|-
|Lower Quartile
|6670.15
|10.1975
|15.445
|-
|Median
|10503.42
|14.345
|28.375
|-
|Upper Quartile
|39735.125
|20.4525
|89.8175
|-
|Maximum
|217919.81
|62.47
|302.76
|-
|Mean
|34725.33267
|18.82571429
|69.2457143
|}
EV/EBITDA is commonly used as a valuation ratio which considers the debt and liabilities with respect to the actual earnings. While a P/E ratio can be used to determine if the stock is under or overvalued compared to other companies in the industry.
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.
== Risks related to growing business ==
=== '''1. Intense Competition''' ===
Amazon has competitors across geographies and industries- retail (physical, e-commerce, omni-channel), computing services (both web and infrastructure), electronic devices, digital content, grocery etc.
=== '''2. Expansion into newer market segments''' ===
There could be a possibility of failure to recoup investments in new technologies, products, or services. This is because of the limited or no experience in these areas.  
== Risks related to operations  ==
=== 1. International Expansion ===
There are several factors like government restrictions/ regulations, physical and technological infrastructure, income levels, geopolitical events etc. which pose a threat to significant revenues and profits from the international market. Amazon has no first-to-market advantage in some geographies and little operating experience in others. For example, regulations in the two biggest Asian markets- India and China are quite restrictive to Amazon’s business activities. Violation of these regulations may result in heavy penalties or revocation of licences. They also face threats from more established local companies and brands.
=== 2. Fluctuation in Demand ===
Variability in Amazon’s retail business because of seasonality, promotions, unforeseen economic, climate and geopolitical events place increased strain on operations. The risks related to fulfilment network optimisation and inventory are magnified during periods of high demand. This results in high fluctuations in operating results and growth rate.
=== 3. Technological Risks (data loss, security breaches, system interruption, lack of redundancy) ===
Because a lot of sensitive and confidential information is collected, processed, stored and transmitted by Amazon, failure to prevent data loss, theft, and misuse could lead to litigation liability, and regulatory action, discouraging its customers and vendors to use the platform, and could harm the business reputation.  
Furthermore, any event that could prevent Amazon from accepting and fulfilling customer orders and providing services, due to system interruption, delays etc. Can make its product and service offerings less attractive and subject to liability.
=== 4. Strategic Alliances, Commercial Agreements, Supplier and other Business Relationships ===
Violations by suppliers or other vendors of applicable laws, regulations, contractual terms, intellectual property rights of others, or Supply Chain Standards, as well as products or practices regarded as unethical, unsafe, or hazardous, could expose Amazon to claims, damage their reputation, limit our growth, and negatively affect our operating results. A point to be noted is that there are limited or single sources of supply in some cases.
Additionally, these arrangements are complex and require substantial infrastructure capacity, personnel, and other resource commitments, which may limit the amount of business Amazon can service. They may not be able to implement, maintain, and develop the components of these commercial relationships, which creates additional risk.


=== ESG Factors ===
=== ESG Factors ===
'''Environmental Factors''':
'''Environmental Factors''':


a. Carbon Footprint and Climate Change: Amazon has committed to several environmental goals, including being net-zero carbon by 2040 and achieving 100% renewable energy usage. The company is investing in renewable energy projects and implementing energy-efficient technologies across its operations.  
# Carbon Footprint and Climate Change: Amazon has committed to several environmental goals, including being net-zero carbon by 2040 and achieving 100% renewable energy usage. The company is investing in renewable energy projects and implementing energy-efficient technologies across its operations.
 
# Waste Reduction and Recycling: Amazon is working towards reducing waste and increasing recycling rates. It has introduced initiatives like Frustration-Free Packaging, which reduces packaging waste, and the Amazon Second Chance program, which encourages customers to recycle electronics and other products.
b. Waste Reduction and Recycling: Amazon is working towards reducing waste and increasing recycling rates. It has introduced initiatives like Frustration-Free Packaging, which reduces packaging waste, and the Amazon Second Chance program, which encourages customers to recycle electronics and other products.  
# Sustainable Supply Chain: Amazon aims to promote sustainability throughout its supply chain by encouraging suppliers to adopt environmentally responsible practices. The company focuses on responsible sourcing, reducing packaging waste, and optimizing transportation to minimize environmental impact.
 
c. Sustainable Supply Chain: Amazon aims to promote sustainability throughout its supply chain by encouraging suppliers to adopt environmentally responsible practices. The company focuses on responsible sourcing, reducing packaging waste, and optimizing transportation to minimize environmental impact.  


'''Social Factors''':
'''Social Factors''':


a. Workforce Development: Amazon is committed to creating a diverse, inclusive, and safe work environment for its employees. The company invests in workforce development programs, training initiatives, and career advancement opportunities.  
# Workforce Development: Amazon is committed to creating a diverse, inclusive, and safe work environment for its employees. The company invests in workforce development programs, training initiatives, and career advancement opportunities.
 
# Labour Practices: There have been ongoing discussions regarding labour practices at Amazon. Critics raise concerns about employee working conditions and labour rights. The company is taking steps to address these concerns and has increased minimum wage for its employees.
b. Labor Practices: There have been ongoing discussions regarding labor practices at Amazon. Critics raise concerns about employee working conditions and labor rights. The company is taking steps to address these concerns and has increased minimum wage for its employees.  
# Community Engagement: Amazon supports local communities through various initiatives, including philanthropy, job creation, and infrastructure development. The company also engages in disaster relief efforts and supports educational programs in underserved communities.
 
c. Community Engagement: Amazon supports local communities through various initiatives, including philanthropy, job creation, and infrastructure development. The company also engages in disaster relief efforts and supports educational programs in underserved communities.  


'''Governance Factors:'''
'''Governance Factors:'''


a. Board Structure and Independence: Amazon's board is composed of directors with diverse backgrounds and expertise. The company emphasizes the importance of independent directors and maintains a strong governance structure.  
# Board Structure and Independence: Amazon's board is composed of directors with diverse backgrounds and expertise. The company emphasizes the importance of independent directors and maintains a strong governance structure.
 
# Transparency and Reporting: Amazon publishes an annual sustainability report that provides detailed information on its ESG initiatives, progress, and challenges. The company strives to maintain transparency in its reporting and regularly engages with stakeholders.
b. Transparency and Reporting: Amazon publishes an annual sustainability report that provides detailed information on its ESG initiatives, progress, and challenges. The company strives to maintain transparency in its reporting and regularly engages with stakeholders.  
# Data Privacy and Security: As a technology-driven company, Amazon faces scrutiny over data privacy and security practices. It is committed to protecting customer data and complying with relevant regulations.
 
c. Data Privacy and Security: As a technology-driven company, Amazon faces scrutiny over data privacy and security practices. It is committed to protecting customer data and complying with relevant regulations.  


Amazon recognizes the importance of ESG factors and has made significant strides in addressing environmental, social, and governance challenges. The company's commitment to reducing its carbon footprint, promoting workforce development, engaging with communities, and maintaining strong governance practices is commendable. However, there are areas where Amazon can further improve, such as addressing labor concerns and enhancing data privacy practices. By continuing to prioritize ESG factors and implementing sustainable practices, Amazon can further strengthen its position as a responsible corporate citizen and contribute to a more sustainable and inclusive future.  
Amazon recognizes the importance of ESG factors and has made significant strides in addressing environmental, social, and governance challenges. The company's commitment to reducing its carbon footprint, promoting workforce development, engaging with communities, and maintaining strong governance practices is commendable. However, there are areas where Amazon can further improve, such as addressing labor concerns and enhancing data privacy practices. By continuing to prioritize ESG factors and implementing sustainable practices, Amazon can further strengthen its position as a responsible corporate citizen and contribute to a more sustainable and inclusive future.    


== References and notes ==
== References and notes ==
__INDEX__
__INDEX__

Latest revision as of 12:40, 8 September 2023

Amazon.com, Inc.
Amazon
FormerlyCadabra, Inc. (1994–1995)
TypePublic
ISIN[https://stockhub.co/index.php?title=Toollabs:isin/&language=en&isin=US0231351067 US0231351067]
Industry
FoundedJuly 5, 1994; 29 years ago (1994-07-05)
Bellevue, Washington, U.S.
FounderJeff Bezos
Headquarters
Seattle, Washington and Arlington, Virginia
,
U.S.
Area served
Worldwide
Key people
Products
Services
RevenueIncrease US$513.98 billion (2022)
Decrease US$12.25 billion (2022)
Decrease US$−2.72 billion (2022)
Total assetsIncrease US$462.68 billion (2022)
Total equityIncrease US$146.04 billion (2022)
OwnerJeff Bezos (9.8%)
Number of employees
  • Decrease 1,541,000 (December 2022)
  • U.S.: 950,000 (June 2021)
Subsidiaries
List
Footnotes / references
[1][2][3][4]

Amazon's mission is to be the most customer-centric company, the best employer, and the safest workplace on Earth.Edit

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's key revenue drivers are e-commerce retail, third-party seller services, AWS, and subscription services. Amazon dominates the e-commerce market in the US, and its smart speakers with Alexa hold a significant market share.

Amazon faces competition in different segments from players such as Walmart, Apple, Google, and Alibaba. Amazon is also involved in initiatives related to renewable energy, satellite network (Project Kuiper), industrial innovation, lending, and has a strong leadership team guiding its operations. Despite some financial challenges, Amazon continues to invest in its infrastructure, logistics capabilities, physical assets, and strategic acquisitions to maintain its market leadership and drive innovation.

The ideaEdit

Amazon.com was founded by Jeff Bezos in 1994. The idea for the company came about when Bezos, a Princeton graduate and successful Wall Street executive, recognized the enormous potential of the Internet and e-commerce in the early 1990s.

In 1994, he came across a statistic that the Internet was growing at a rate of 2300% per year. Intrigued, Bezos left his job at D.E. Shaw, a hedge fund, and started to explore potential business ideas that could be capitalized on this boom.

Bezos made a list of 20 possible product categories to sell online, and books were on top of the list. The reasons were many - books were low cost and universally demanded. Plus, no physical bookstore could match the selection of books that an online store could offer.

After moving to Seattle, Bezos set up the business in his garage, where he and a few employees began developing the software for Amazon.com. He named his new company after the Amazon River in South America, in part because it suggested scale (Amazon River is the largest in the world), and his goal was for Amazon to become the largest bookstore in the world.

Amazon.com was officially launched in July 1995. In the beginning, it was only a bookstore. Still, Bezos had a vision for Amazon to become an "everything store". Today, Amazon sells millions of different items, and its business interests extend far beyond retail to include cloud services, digital streaming, artificial intelligence, and more.

Mission StatementEdit

Amazon's mission statement is:

"Our mission is to be Earth's most customer-centric company. This is what unites Amazonians across teams and geographies as we are all striving to delight our customers and make their lives easier, one innovative product, service, and idea at a time."

This statement reflects Amazon's aim to put the customer first and continuously innovate on their behalf.

Segments covered by AmazonEdit

E-CommerceEdit

Amazon operates as one of the world's most expansive online retail platforms, offering an extensive assortment of products spanning categories such as electronics, books, clothing, and household goods, among others.

Cloud Computing servicesEdit

Through its dedicated cloud computing platform, Amazon Web Services (AWS), Amazon offers a range of services to businesses and individuals, including:

  1. Infrastructure as a Service (IaaS): This service allows users to access virtual servers, storage, and networking capabilities, eliminating the need for physical hardware.
  1. Platform as a Service (PaaS): This service provides users with the ability to develop applications using pre-configured platform templates.
  2. Software as a Service (SaaS): This service enables users to utilize specific applications without the need for outright purchase or installation.

Digital ContentEdit

Amazon provides an extensive array of digital content platforms tailored to cater to a range of interests:

  1. Amazon Prime Video: A streaming service featuring an expansive library of movies and TV shows, offering both popular hits and Amazon's original productions.
  2. Amazon Music: A platform catering to music enthusiasts, streaming a diverse selection of songs across various genres.
  3. 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 DeliveryEdit

Amazon has developed an extensive logistics and delivery network to fulfil orders efficiently, including its own delivery service called Amazon Logistics.

Smart Home DevicesEdit

Amazon has introduced various smart home devices under the Amazon Echo brand, powered by the virtual assistant Alexa. These include smart speakers, smart displays, and smart home automation devices.

Grocery and Food DeliveryEdit

Through Amazon Fresh, Whole Foods Market (acquired by Amazon in 2017), and Amazon Prime Now, the company provides grocery and food delivery services. Amazon Prime Now, will stop existing and the fast delivery service will be combined with the third party partners

HealthcareEdit

Amazon has expanded into the healthcare sector with initiatives such as Amazon Pharmacy, offering prescription medication delivery, and Amazon Care, a virtual healthcare service for employees.

Entertainment and MediaEdit

Amazon Studios produces and distributes original movies and TV shows through Amazon Prime Video. The company has also ventured into sports broadcasting, streaming live sports events.

AdvertisingEdit

Amazon is steadily expanding its advertising division, providing a comprehensive suite of products and services via Amazon Advertising. This enables brands to effectively reach their customers on Amazon's various platforms.

Hardware and Consumer ElectronicsEdit

Beyond its range of smart home devices, Amazon also produces and retails an array of hardware products. This includes the Fire series of tablets and TV streaming devices, as well as the popular Kindle e-readers.

OthersEdit

Other business sectors Amazon is involved in include Robotics, as demonstrated by initiatives like Amazon Scout, and space exploration, spearheaded by Blue Origin. The company also has significant investments in artificial intelligence and machine learning technologies.

Breakdown of sector revenues[5]Edit

E-commerce RetailEdit

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. This accounts for 42% of the company's income which is basically a fee from 3rd party retailers selling their products on amaozn.

Physical storesEdit

Amazon's physical stores have been experiencing significant growth in terms of revenues. With their diverse range of offerings, including Amazon Go cashier-less stores, Amazon Books, and Amazon 4-star, the brick-and-mortar locations have attracted customers that resulted in substantial revenue for the e-commerce giant. In 2022, Amazon's online stores raked in an $18.96 billion in revenue.

Amazon Web Services (AWS)Edit

AWS is a cloud computing platform offered by Amazon. It provides numerous services, such as storage, computing power, database management, and analytics, to businesses and individuals. AWS has been a significant revenue driver for Amazon, contributing a significant portion of its overall revenue. In 2022, Amazon's revenue from Amazon Web Services (AWS) amounted to a $80 billion.

Subscription ServicesEdit

Amazon offers various subscription-based services, such as Amazon Prime, which provides benefits like free shipping, streaming of movies and TV shows, and access to exclusive deals. Prime membership fees contribute to the subscription services sector revenue. For the year 2022, Amazon generated $35.22 billion from Subscription Services.

Third-Party Seller ServicesEdit

Amazon allows third-party sellers to sell their products through its platform. Amazon charges fees for services like fulfilment (through its Fulfilment by Amazon program), referral fees, and advertising. These fees contribute to the third-party seller services sector. In the year 2022, Third-Party Seller Services contributed to Amazon's revenue with a staggering $117.71 billion.

AdvertisingEdit

Amazon has been expanding its advertising business by offering display and sponsored product ads on its platform. This sector generates revenue through advertising fees paid by businesses to promote their products on Amazon. In 2022, the advertising revenue generated by Amazon amounted to $37.74 billion.

Other RevenueEdit

This category includes various sources of revenue for Amazon that do not fall into the aforementioned sectors. It may include revenue from physical stores (such as Whole Foods Market, acquired by Amazon), digital content sales, and other miscellaneous sources. For the year 2022, Amazon generated $4.25B billion from Other Revenue.

Amazon market shares across key segmentsEdit

The previous section showcases Amazon’s breakdown of revenue and the most important segments to Amazon from the perspective of revenues are: e-commerce, third party seller services, AWS and subscription services. Below figures will illustrate the market share of Amazon in some of those segments.[6]

US e-commerce market share (June 2022)Edit

Amazon is the indisputable leader in the US e-commerce sector, enjoying a commanding position, with Walmart, Apple, and eBay trailing behind. Other participants in the market hold a mere maximum of 2% of the overall share.[7]

Us e commerce market.png

Noteworthy statistics regarding Amazon's position in the industry are as follows:

Statistic Statistic value
2021 Amazon e-commerce revenue USD 220 billion
Number of active sellers (2022) 9.7 million
Number of shipments in 2021 7.7 billion
Global number of users (2022) 310 million
Number of fulfilment centres (2023) 185
Total area of fulfilment centres (2019) 150 mln sq ft

Ecommerce TrendsEdit

Global eccomerce sales will reach $5.8 trillion in 2023, reaching $8 trillion in 2027 (https://www.shopify.com/uk/blog/global-ecommerce-sales). Between 2023 and 2028 the average annual growth rate of ecommerce sales will be 8.62% (https://www.oberlo.com/statistics/global-ecommerce-sales-growth). This growth is being supported by mobile use for online shopping. Mobile ecommerce is expected to 42.9% of ecommerce sales by 2024.

Amazon's eccomerce sales was as follows:

141.2 billion 2019

197.3 billion 2020 (40% increase)

222 billion 2021 (12.53% increase)

220 billion in 2022 (decline of 0.932%)

The 40% in 2020 was due to covid. While this growth is unique as a result of that year the sales volumes have remained in that region as a result. Furthermore, Amazon market share of global eccomerce sales increased singificantly in 2020 as global growth only reached 25.7% (https://www.velotrade.com/blog/global-growth-of-ecommerce-markets/). However, since this Amazon's growth has been trivial to global growth in eccomcer sales - global growth reaching 19.6% in 2021 and 12.7% in 2022 (https://www.velotrade.com/blog/global-growth-of-ecommerce-markets/).

Smart speaker market share (2020)Edit

Smart speaker market.png

Much like their unrivalled presence in the e-commerce industry, Amazon's smart speakers, powered by the popular voice assistant Alexa, maintain a dominant position in the market.

The following diagram illustrates the demand for various products on Amazon. Electronics goods emerge as the most sought-after category, closely followed by clothing and shoes, and then home and furniture. Conversely, pet supplies rank as the least frequently ordered items on the platform.[8]

Stats1.png

Amazon's prominence as an e-commerce giant extends beyond its popularity in product categories. In fact, it serves as the initial search destination for over half of online shoppers, cementing its position as a starting point for their online purchasing journey.[8]

Stats2.png

Cloud computing marketEdit

Stats3.pngEdit

In 2019, Amazon dominated the cloud computing market, surpassing its major competitors with a significant 18% market share. Among the various segments of cloud computing, Amazon's Infrastructure as a Service (IaaS) holds an impressive 45% market share. As of Q1 2022, AWS continues to lead as the preferred provider of cloud computing services, with Microsoft's Azure making progress but still trailing behind.

There are several noteworthy trends in the cloud computing market that AWS can leverage to its advantage:

  1. Growing popularity of the cloud among small and medium-sized enterprises (SMEs).
  2. Increasing adoption of multi-cloud solutions by businesses.
  3. Expansion of the cloud gaming market.

To provide an overview of the competition faced by Amazon in its key segments, the following table summarises the landscape:

Segment of competition Main competitors
E-commerce Apple, Walmart, eBay, Homedepot, Costco, Shopify
Cloud Computing Microsoft, Google, Sales Force, Alibaba, several other chinese competitors
Digital content Netflix, Spotify, Apple,
Smart home appliances Alibaba, Xiaomi, Google, Baidu, Apple, Echo dot

On-going and future Amazon projectsEdit

Renewable energyEdit

In September 2022, Amazon publicly committed to addressing global warming, announcing an ambitious renewable energy initiative.[9] The company disclosed plans for 379 new renewable energy projects worldwide, which involve the construction of solar and wind facilities. The goal of these projects is to power approximately 4.6 million homes with renewable energy while transitioning all Amazon business units to 100% renewable energy dependence.

Poland and France were selected for the inaugural projects. In October 2022, Spanish renewable investment platform Q-Energy completed the financing for a solar farm in Poland dedicated to generating electricity for Amazon. That same year, Apollo Power, an Israeli flexible solar module manufacturer, announced a contract with Amazon for its product to be used at a facility in France.

In 2019, Amazon underscored its dedication to a net-zero carbon world by co-founding The Climate Pledge. The company aims to achieve net-zero carbon status by 2040, a full decade ahead of the Paris Agreement. As of now, The Climate Pledge has accrued more than 375 signatories, including prominent corporations like IBM, Microsoft, PepsiCo, Siemens, Unilever, Verizon, and Visa.

In addition to this, Amazon has initiated a partnership with electric vehicle company Rivian, placing an order for over 100,000 electric vehicles for carbon-free delivery, scheduled to be operational by 2030. Notably, 3,000 of these vehicles are already in service.

Car1.png

Car2.png

Project Kuiper and satellite networkEdit

Amazon's Project Kuiper is a recent venture aiming to address the challenge of costly and complex traditional antenna systems, a difficulty often faced in various regions of the world where access to broadband and mobile networks is limited.[10]

The project involves the deployment of a satellite network intended to provide broadband and internet connectivity to these underserved areas. The function of this system is predicated upon households purchasing a "customer terminal," which serves as a connection point to the satellite network.

The customer terminal, as compared to conventional antennas, is lighter, less expensive, and simpler to install, as per the information provided. Once purchased and set up, this terminal enables households to connect to the overhead satellite network, thereby facilitating internet access.

The following table provides a comparative analysis of three distinct customer terminals.

Customer terminal type: Cost of installation: Speed of terminal Size Weight
Medium sized terminal aimed at residential and small buiness customers $400 400 megabits per second (Mbps) Less than 11 inches square and 1 inch thick Less than 5 pounds
Ultra compact terminal aimed for a personal use. Light and transportable NA 100 megabits per second (Mbps) 7 square inches 1 pound
A high-bandwidth design for the most demanding needs NA but aimed at governments, telecoms and enterprises 1 gigabit per second (Gbps) 19 inches by 30 inches NA

11.png

Terminals for residential and small business customers

333.png

Ultra compact terminal

Image12.png

A high-bandwidth design for the most demanding needs

Image3333.png

Amazon industrial innovation fund[11]Edit

In April 2022, Amazon announced the creation of a USD 1 billion platform, dubbed the "Amazon Industrial Innovation Fund". This venture capital-style fund is designed with a focus on bettering the company's operations, enhancing logistics, improving delivery speeds, and advancing the experience for warehouse and logistics employees.

The aim of the fund is to invest in non-Amazon owned companies that can contribute significantly to improvements in delivery speed and employee experience within the logistics and warehousing industries.

The initial round of investments is targeted towards technology and safety wear ventures, with further details provided below:

Investee Main offerings Website
Modjoul Wearable safety technology, personalised ads and safety signals https://modjoul.com
Vimaan Computer vision and artificial intelligence solutions to improve inventory management https://vimaan.ai
Agility Robotics Bi-pedal walking robot https://agilityrobotics.com
BionicHIVE Autonomous robotic solution facilitating with shelving racks and boxes in warehouses https://www.bionichive.com
Mantis Robotics Tactile robotic arm that uses sensor technology to cohesively work alongside people https://www.mantis-robotics.com

Amazon lendingEdit

Amazon, which began its lending operations in 2016, is considering a partnership with Goldman Sachs to expand this facet of its business. As of December 2022, Amazon had over USD 863 million in outstanding loans, with interest rates levied between 6% and 17% on the remaining balance.

This potential collaboration is enabled by the "Open Banking" regulation, a set of rules implemented by the European Union in 2019. The regulation permits financial institutions to share critical financial information, such as credit histories, with technology companies.

Amazon, despite having abundant customer data, does not possess direct access to clients' credit histories. This information is crucial in assessing credit risk and lending viability. A partnership with Goldman Sachs would fill this gap by providing Amazon access to this important data, potentially enhancing its lending operations.

It's important to note that previous instances have shown e-commerce platforms collaborating with financial service providers to offer capital to SMEs. However, the actual impact of this proposed venture on small and medium-sized businesses would depend on various factors including competition and market conditions, and thus cannot be precisely predicted at this point.

Team[12]Edit

LeadershipEdit

Executive ChairmanEdit

Image11111111111333333333.png

Jeff Bezos is the visionary founder of Amazon.com.

Bezos is also the founder of Blue Origin, focusing on reducing space travel costs and enhancing safety. He owns The Washington Post and is known for his philanthropy. The Bezos Earth Fund supports conservation efforts, while The Bezos Day One Fund helps homeless families and establishes preschools in underserved communities.

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 OfficerEdit

Image111111111111.png

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 OfficerEdit

Image12213.png

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 StoresEdit

Image34.png

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 ControllerEdit

Image44444.png

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 ServicesEdit

Image5555.png

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 CounselEdit

Image67.png

David Zapolsky joined Amazon.com in November 1999 as Associate General Counsel for Litigation and Regulatory matters and was promoted to Vice President in April 2002. He became Vice President, General Counsel and Secretary in September 2012, and Senior Vice President, General Counsel and Secretary in May 2014. He currently oversees the company’s legal, policy, compliance, and regulatory affairs and serves as Amazon’s corporate secretary.

Prior to joining Amazon.com, David was a partner at the Seattle offices of Dorsey & Whitney and Bogle & Gates. Before moving to Seattle from New York City in 1994, he served as an Assistant District Attorney in the Brooklyn District Attorney’s Office and later practiced law at Wachtell Lipton Rosen & Katz. He received his undergraduate degree in music from Columbia University and a J.D. with honors from the University of California, Berkeley.

Ownership structureEdit

Beneficial owners

As of the 2023 Proxy Statement[13], individuals who serve as directors and/or executive officers, the collective group of directors and executive officers, and individuals and organizations that own 5% or more of the total common stock have been granted sole voting and investment power. The beneficial owners list has been released as follows:

Beneficial owner Share stake
Jeffrey P. Bezos 12.3%
The Vanguard Group, Inc. 6.9%
BlackRock, Inc. 5.8%
Andrew R. Jassy 0.02%
Keith B. Alexander <0.01%
Edith W. Cooper <0.01%
Jamie S. Gorelick <0.01%
Daniel P. Huttenlocher <0.01%
Judith A. McGrath <0.01%
Indra K. Nooyi <0.01%
Jonathan J. Rubinstein <0.01%
Patricia Q. Stonesifer <0.01%
Wendell P. Weeks <0.01%
Brian T. Olsavsky <0.01%
Douglas J. Herrington <0.01%
Adam N. Selipsky <0.01%
David A. Zapolsky <0.01%
All directors and executive officers as a group (16 persons) 12.3%

Other major stockholders[14]Edit

Stockholders Share stake
SSgA Funds Management, Inc. 3.24%
Fidelity Management & Research Co... 2.47%
T. Rowe Price Associates, Inc. (I... 1.85%
Geode Capital Management LLC 1.61%
Norges Bank Investment Management 0.96%
Capital Research & Management Co.... 0.92%

Corporate StrategyEdit

Infrastructure Development

Amazon has heavily invested in building a robust infrastructure to support its vast operations. The company has established a global network of fulfilment centres strategically located to ensure efficient order fulfilment and fast delivery to customers. These fulfilment centres are equipped with advanced technologies, including robotics and automation, to optimize operational efficiency and minimize processing times. Additionally, Amazon has developed data centres worldwide to support its cloud computing services offered through Amazon Web Services (AWS).

Logistics Capabilities

Amazon has developed a highly efficient and scalable logistics network to support its extensive product range and ensure timely delivery. The company operates its fleet of delivery vehicles, including vans and trucks, to handle last-mile deliveries and manage its logistics operations effectively. Furthermore, Amazon has expanded its logistics capabilities through partnerships with third-party logistics providers and the establishment of its delivery service, Amazon Logistics. This enables Amazon to have greater control over its delivery process and enhance the customer experience.

Physical Assets

In addition to its digital presence, Amazon has made tangible investments in physical assets to support its business operations. This includes the acquisition of Whole Foods Market, a prominent grocery store chain, which provides Amazon with a physical retail footprint and strengthens its position in the grocery industry. Amazon has also established physical stores, such as Amazon Go and Amazon 4-star, to create immersive shopping experiences and extend its reach to offline customers.

Strategic Acquisitions

Amazon has pursued strategic acquisitions to expand its capabilities, enter new markets, and gain a competitive edge. Notable acquisitions include the purchase of Ring, a home security company specializing in smart doorbells and cameras, and Twitch, a popular live streaming platform for gaming and creative content. These acquisitions have allowed Amazon to diversify its offerings, integrate innovative technologies into its ecosystem, and tap into new customer segments.

Amazon's tangible assets and investments play a crucial role in supporting its corporate strategy and ensuring the delivery of exceptional customer experiences. The company's infrastructure, logistics capabilities, physical assets, and strategic acquisitions all contribute to its market leadership and growth. By continually investing in tangible resources, Amazon strengthens its operational efficiency, expands its market reach, and enhances its competitive advantage. As Amazon continues to innovate and adapt to evolving customer needs, its tangible assets will remain key drivers of its success in the highly competitive e-commerce landscape.

FinancialsEdit

HistoricEdit

Most recent quarterEdit

During the three month period ending on 31st March 2023 Amazon Inc achieved revenues of $127.36 billion, showing a 14,64% decrease to the last quarter of 2022. Despite that, it achieved a net income of $3.17 billion, marking an impressive increase to the previous quarter, when a $278 million net income was reported. A significant cut to operating expenses was observed, that resulted to the operating margin increasing from 1.83% to 3.75%.

Most recent yearEdit

In the end of the fiscal year of 2022 Amazon, Inc reported a loss of $5.94 billion. The revenue and total assets experienced an slight increase compared to 2021, interrupting the exponential increase trend observed in the previous years. A 23.35% increase in operating expenses can partially account for the loss, as it outweighs the 14% increase in gross profit, resulting in a lower operating income. The increase in expenses can be linked to the Rivian Automotive (RIVN) investment that Amazon originally made in 2019. The company went public in 2021, and lost 75% of its value during the next year, therefore not returning the expected turnovers.[15]

All periods[16]Edit

Year Year end date Income Statement Balance Sheet Employees
Revenues($million) Net profits ($million) Total Assets($million)
1 31/12/1997 $148 -$31 $149 614
2 31/12/1998 $610 -$125 $648 2,100
3 31/12/1999 $1,640 -$720 $2,466 7,600
4 31/12/2000 $2,762 -$1,411 $2,135 9,000
5 31/12/2001 $3,122 -$567 $1,638 7,800
6 31/12/2002 $3,933 -$149 $1,990 7,500
7 31/12/2003 $5,264 $35 $2,162 7,800
8 31/12/2004 $6,921 $588 $3,248 9,000
9 31/12/2005 $8,490 $359 $3,696 12,000
10 31/12/2006 $10,711 $190 $4,363 13,900
11 31/12/2007 $14,835 $476 $6,485 17,000
12 31/12/2008 $19,166 $645 $8,314 20,700
13 31/12/2009 $24,509 $902 $13,813 24,300
14 31/12/2010 $34,204 $1,152 $18,797 33,700
15 31/12/2011 $48,077 $631 $25,278 56,200
16 31/12/2012 $61,093 -$39 $32,555 88,400
17 31/12/2013 $74,452 $274 $40,159 117,300
18 31/12/2014 $88,988 -$241 $54,505 154,100
19 31/12/2015 $107,006 $596 $65,444 230,800
20 31/12/2016 $135,987 $2,371 $83,402 341,400
21 31/12/2017 $177,866 $3,033 $131,310 566,000
22 31/12/2018 $232,887 $11,261 $162,648 647,500
23 31/12/2019 $280,522 $13,976 $225,248 822,500
24 31/12/2020 $386,064 $24,178 $321,195 1,298,000
25 31/12/2021 $469,822 $38,151 $420,549 1,608,000
26 31/12/2022 $513,983 -$5,936 $462,675 1,541,000

Revenues, net profits and total assets plot.png

ForwardEdit

MethodEdit

To evaluate the forecasted revenue and net profit values, the function "FORECAST.EST()" was used in Microsoft Excel. The inputs were the historical values, the timeline corresponding to those values (1997-2022), the target date (2032), and seasonality, which was set to 12. Excel uses the method of linear regression, which bases the future values of the historical trends. A forecast for the next 10 years is provided, as a more in-depth analysis is required to accurately predict the financials across the entire lifetime of the company.

Financial ForecastsEdit

Year Revenue ($millions) Net Profit ($millions)
Forecast Lower-bound value Upper-bound value Forecast Lower-bound value Upper-bound value
2023 316,184 129,953 502,415 10,651 (4,996) 26,298
2024 329,583 141,856 517,310 10,001 (5,771) 25,774
2025 343,325 154,090 532,559 10,335 (5,564) 26,234
2026 405,810 215,056 596,563 13,082 (2,945) 29,109
2027 410,113 217,829 602,396 12,965 (3,190) 29,120
2028 419,340 225,515 613,165 14,423 (1,862) 30,708
2029 438,952 243,575 634,330 14,562.07 (1,853) 30,977
2030 465,707 268,765 662,648 18,514 1,968 35,061
2031 489,988 291,472 688,504 19,927 3,248 36,606
2032 458,247 258,146 658,349 16,926 114.02 33,739

NetProfitForecacst.png

Risks related to growing businessEdit

Intense CompetitionEdit

Amazon has competitors across geographies and industries- retail (physical, e-commerce, omni-channel), computing services (both web and infrastructure), electronic devices, digital content, grocery etc.

Expansion into newer market segmentsEdit

There could be a possibility of failure to recoup investments in new technologies, products, or services. This is because of the limited or no experience in these areas.  

Risks related to operationsEdit

International ExpansionEdit

There are several factors like government restrictions/ regulations, physical and technological infrastructure, income levels, geopolitical events etc. which pose a threat to significant revenues and profits from the international market. Amazon has no first-to-market advantage in some geographies and little operating experience in others. For example, regulations in the two biggest Asian markets- India and China are quite restrictive to Amazon’s business activities. Violation of these regulations may result in heavy penalties or revocation of licences. They also face threats from more established local companies and brands.

Fluctuation in DemandEdit

Variability in Amazon’s retail business because of seasonality, promotions, unforeseen economic, climate and geopolitical events place increased strain on operations. The risks related to fulfilment network optimisation and inventory are magnified during periods of high demand. This results in high fluctuations in operating results and growth rate.

Technological Risks (data loss, security breaches, system interruption, lack of redundancy)Edit

Because a lot of sensitive and confidential information is collected, processed, stored and transmitted by Amazon, failure to prevent data loss, theft, and misuse could lead to litigation liability, and regulatory action, discouraging its customers and vendors to use the platform, and could harm the business reputation.  

Furthermore, any event that could prevent Amazon from accepting and fulfilling customer orders and providing services, due to system interruption, delays etc. Can make its product and service offerings less attractive and subject to liability.

Strategic Alliances, Commercial Agreements, Supplier and other Business RelationshipsEdit

Violations by suppliers or other vendors of applicable laws, regulations, contractual terms, intellectual property rights of others, or Supply Chain Standards, as well as products or practices regarded as unethical, unsafe, or hazardous, could expose Amazon to claims, damage their reputation, limit our growth, and negatively affect our operating results. A point to be noted is that there are limited or single sources of supply in some cases.

Additionally, these arrangements are complex and require substantial infrastructure capacity, personnel, and other resource commitments, which may limit the amount of business Amazon can service. They may not be able to implement, maintain, and develop the components of these commercial relationships, which creates additional risk.

Risks related to inventory and paymentsEdit

There are several inventory risk factors that may adversely affect the operating results . Some of these are rapid changes in product cycles and pricing, defective merchandise, changes in customer demand and consumer spending patterns, changes in consumer tastes with respect to products offered, spoilage, new product launches. Additionally, certain goods or components require significant lead time and prepayment which may not be returnable. They also carry significant inventory levels of certain products, like consumer electronics, and are sometimes unable to sell products in sufficient quantity or to meet demand during relevant selling seasons.

For existing and future payment options they offer to their customers, Amazon currently is subject to, and may become subject to additional, regulations and compliance requirements (including obligations to implement enhanced authentication processes that could result in significant costs and reduce the ease of use of their payments products), as well as fraud. For certain payment methods, including credit and debit cards, they pay interchange and other fees, which may increase over time and raise their operating costs and lower profitability.

ValuationEdit

We employed a Discounted Cash Flow (DCF) model to arrive at an intrinsic valuation for Amazon. Furthermore, we utilized a trading comparable analysis to generate a relative valuation.

DCFEdit

We obtained the average year-on-year growth rate by using revenue figures from 2018 to 2022. This growth rate was then utilised to project the expected revenues from 2023 to 2027. In a similar fashion, we used the average growth in taxes (as a percentage of EBIT) from the past years to forecast future taxes. As for other financial statement components, their growth was analysed and forecasted as a percentage of the projected revenue.

$ million Historical Projected
Income Statement [17] 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Revenue 232,887 280,522 386,064 469,822 513,983 565,381 630,400 693,440 780,120 873,735
% growth - 20.45% 37.62% 21.70% 9.40% 10.00% 11.50% 10.00% 12.50% 12.00%
EBIT 25,330 30,457 39,572 48,362 39,039 49,162 61,750 75,553 93,578 114,419
% revenue 11% 11% 10% 10% 8% 9% 10% 11% 12% 13%
Profit 10,073 11,588 21,331 33,364 -2,722 -42 5,519 12,375 22,421 35,217
% revenue 4% 4% 6% 7% -1% 0% 1% 2% 3% 4%
Cash Flow items [18]
D&A 12,613 15,715 16,748 23,421 25,528 37,084 43,325 49,566 56,587 63,664
% of PPE 13% 11% 8% 8% 7% 9% 9% 9% 9% 9%
Net Operating Cash Flow 30,723 38,514 66,064 46,327 46,752 55,554 80,778 95,548 116,789 139,190
Net Investing Cash Flow -12,369 -24,281 -59,611 -58,154 -37,601 -67,097 -74,744 -75,285 -84,545 -85,815
Net Financing Cash Flow -7,686 -10,066 -1,104 6,291 9,718 -936 1,064 1,064 1,064 1,064
Cash, BOP - 32,176 36,413 42,380 36,480 54,256 41,777 48,876 70,204 103,512
Net Change in Cash 10,317 4,237 5,967 -5,900 17,776 -12,479 7,099 21,328 33,309 54,439
Cash, EOP 32,176 36,413 42,380 36,480 54,256 41,777 48,876 70,204 103,512 157,952
Net Operating Cash Flows* 30,723 38,514 66,064 46,327 46,752 55,554 80,778 95,548 116,789 139,190
CAPEX -11,323 -12,689 -35,044 -55,396 -58,321 -57,721 -64,650 -64,415 -72,837 -73,202
Free Cash Flow 19,400 25,825 31,020 -9,069 -11,569 -2,168 16,128 31,133 43,952 65,988
Note: Net Operating Cash Flows incorporate the effect of Depreciation and Amortisation and changes in Net Working Capital.

Sources suggest a terminal growth rate within the 3-5% range[19]. The DCF model employs an estimate of 3%, 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 $1.199 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%[20]. 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.

Input name Input value Reasons
Risk free rate 3.87% US 5 year Treasury note rate [20]
Market risk premium 4.70% Analysts expectations [21]
Levered beta 0.88 Analysts expectations [22]
Cost of equity 8.01% CAPM model
Cost of debt 5.25% US typical debt rate [23]
Internally calculated WACC 7.74% Calculated using the WACC formula from above estimates
Terminal growth rate 3% Analysts expectations [19]

The market risk premium fluctuates between 4.2% and 5.2% [21], 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 [22], 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% [23], we arrive at a weighted average cost of capital (WACC) of 7.74%.

DCF calculation incorporates the H-model with an underlying assumption that starting from 2027 Amazon's free cash flows will grow by 7% until until 2037 where the terminal growth of cash flows will be 3%. The H-model assumes a smooth transition between the two stage of Amazon lifecycle. In the process of discounting the future Free Cash Flow to its present value, the WACC serves as the discount factor. This calculation leads to a share price of $138.23, a summary of which is presented in the table below.

Metric Metric value
WACC 7.96%
Short term Growth 7%
Long term growth 3%
H terminal value 1,758,880
PV of terminal value 1,199,300
PV of all future cash flows 1,326,882
Number of years 10
Cash 54,253
Debt 140,118
Equity 1,412,747
Number of shares outstanding 10,220
Fair share price 138.23
Current Share Price 134.30

The closing share price for Amazon stocks on 14th July 2023 stood at $134.40[24].

We conducted a sensitivity analysis using a WACC range of 6.5% to 9.0%, and a terminal growth rate span of 1.5% to 4.0%.

WACC
6.50% 7.00% 7.50% 7.74% 8.00% 8.50% 9.00%
Terminal growth rate 1.5% $          152.25 $        137.38 $        125.02 $        115.37 $        114.60 $        105.70 $          98.00
2.0% $          164.52 $        147.00 $        132.71 $        121.71 $        120.84 $        110.82 $        102.26
2.5% $          179.85 $        158.77 $        141.94 $        129.21 $        128.21 $        116.79 $        107.16
3.0% $          199.57 $        173.48 $        153.22 $        138.22 $        137.05 $        123.86 $        112.89
3.5% $          225.86 $        192.38 $        167.32 $        149.26 $        147.86 $        132.33 $        119.65
4.0% $          262.67 $        217.59 $        185.45 $        163.08 $        161.38 $        142.69 $        127.77

Relative ValuationEdit

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 [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 EV/Revenue ratio serves as an effective tool to determine whether a stock is undervalued or overvalued compared to its industry peers by accounting for the enterprise value and revenue generated by the firm.

The table provides a brief analysis of the ratios and market cap of the several companies in the analysis including their minimum/maximum, median, quartile and mean values.  

In order to consider growth in relative valuation, PEG and growth adjusted EV/Revenue valuation multiples are used. PEG is the ratio of P/E to the annual growth in EPS. Growth adjusted EV/Revenue multiple is the ratio of EV/Revenue to the annual growth in revenue.

Name P/E [26] EPS 2022 [27] EPS 2023 [28] EPS growth PEG
Amazon.com Inc 321.8 -0.27 1.57 -681.5% -47.22
MercadoLibre Inc 92.3 9.53 16.69 75.1% 122.85
Etsy Inc -16.1 -5.48 2.33 -142.5% 11.30
Chewy Inc 306.7 0.12 -0.01 -108.3% -283.11
eBay Inc 39.2 -2.27 3.35 -247.6% -15.83
Alibaba Group 23.9 2.34 8.52 264.1% 9.05
Vipshop Holdings Ltd 9.8 1.43 1.88 31.5% 31.14
Median 31.6 0.8 2.8 -38.4% 10.2
Mean 111.1 0.8 4.9 -115.6% -24.5
Name Revenue 2022 [29] Revenue 2023 [28] Revenue growth EV/Revenue Growth Adjusted EV/Revenue
Amazon.com Inc 514.0 560.8 9.1% 2.9 31.8
MercadoLibre Inc 10.5 13.5 28.5% 5.2 18.2
Etsy Inc 2.6 2.8 7.6% 4.8 63.5
Chewy Inc 10.1 11.4 12.7% 2.0 15.8
eBay Inc 9.8 10.1 2.6% 2.5 96.0
Alibaba Group 126.491 132.7 4.9% 2.5 50.8
Vipshop Holdings Ltd 14.956 15.8 5.6% 2.5 44.3
Median 10.3 12.5 6.6% 2.5 47.6
Mean 98.3 106.7 10.1% 3.2 45.8

Amazon had a negative annual EPS in 2022 which results in a negative EPS growth and PEG. Therefore, this multiple is not used to obtain a valuation. It has both a high PE and EV/Revenue multiple compared to the industry median, which usually implies that the stock is overvalued.

On the other hand, Amazon has a noticeably lower growth adjusted EV/Revenue multiple (31.8) compared to the industry median (47.6). This results in an implied share price of $211.09, which is significantly higher than the current share price.

AppendixEdit

Financial StatementsEdit

Balance sheet
Year end date 31/12/2018 31/12/2019 31/12/2020 31/12/2021 31/12/2022
Current Assets
Cash and Cash Equivalents ($million) $31,750 $36,092 $42,122 $36,220 $53,888
Marketable securities ($million) $9,500 $18,929 $42,274 $59,829 $16,138
Inventory ($million) $17,174 $20,497 $23,795 $32,640 $34,405
Net Receivables ($million) $16,677 $20,816 $24,542 $32,891 $42,360
Total Current Assets ($million) $75,101 $96,334 $132,733 $161,580 $146,791
Long-Term Assets
Net Property and equipment ($million) $61,797 $72,705 $113,114 $160,281 $186,715
Operating leases ($million) -- $25,141 $37,553 $56,082 $66,123
Goodwill ($million) $14,548 $14,754 $15,017 $15,371 $20,288
Other Assets ($million) $11,202 $16,314 $22,778 $27,235 $42,758
Total Assets ($million) $162,648 $225,248 $321,195 $420,549 $462,675
Current Liabilities
Accounts Payable ($million) $38,192 $47,183 $72,529 $78,664 $79,600
Accrued expenses and other ($million) $23,663 $32,439 $44,138 $51,775 $62,566
Unearned revenue ($million) $6,536 $8,190 $9,708 $11,827 $13,227
Total Current Liabilities ($million) $68,391 $87,812 $126,385 $142,266 $155,393
Long-Term lease liabilities ($million) $9,650 $39,791 $52,573 $67,651 $72,968
Long-Term Debt ($million) $23,495 $23,414 $31,816 $48,744 $67,150
Other Liabilities ($million) $17,563 $12,171 $17,017 $23,643 $21,121
Total Liabilities ($million) $119,099 $163,188 $227,791 $282,304 $316,632
Stock Holders Equity
Common Stocks ($million) $5 $5 $5 $106 $108
Capital Surplus ($million) $26,791 $33,658 $42,865 $55,437 $75,066
Retained Earnings $19,625 $31,220 $52,551 $85,915 $83,193
Treasury Stock ($million) -$1,837 -$1,837 -$1,837 -$1,837 -$7,837
Other Equity ($million) -$1,035 -$986 -$180 -$1,376 -$4,487
Total Equity ($million) $43,549 $62,060 $93,404 $138,245 $146,043
Total Liabilities & Equity ($million) $162,648 $225,248 $321,195 $420,549 $462,675
Cash flow
Year end date 31/12/2018 31/12/2019 31/12/2020 31/12/2021 31/12/2022
Net Income ($million) $10,073 $11,588 $21,331 $33,364 -$2,722
Cash Flows-Operating Activities
Depreciation ($million) $15,341 $21,789 $25,180 $34,433 $41,921
Net Income Adjustments ($million) $6,352 $7,575 $6,072 -$1,859 $28,439
Changes in Operating Activities
Changes in Inventories ($million) -$1,314 -$3,278 -$2,849 -$9,487 -$2,592
Accounts Receivable ($million) -$4,615 -$7,681 -$8,169 -$18,163 -$21,897
Accounts Payable ($million) $3,263 $8,193 $17,480 $3,602 $2,945
Other Operating Activities ($million) $1,623 $328 $7,019 $4,437 $658
Net Cash Flow-Operating ($million) $30,723 $38,514 $66,064 $46,327 $46,752
Cash Flows-Investing Activities
Capital Expenditures ($million) -$11,323 -$12,689 -$35,044 -$55,396 -$58,321
Investments ($million) -$7,100 -$31,812 -$72,479 -$60,157 -$2,565
Other Investing Activities ($million) $6,054 $20,220 $47,912 $57,399 $23,285
Net Cash Flows-Investing ($million) -$12,369 -$24,281 -$59,611 -$58,154 -$37,601
Cash Flows-Financing Activities
Proceeds from short-term debt ($million) $886 $1,402 $6,796 $7,956 $41,553
Repayments of short-term debt ($million) -$813 -$1,518 -$6,177 -$7,753 -$37,554
Proceeds from long-term debt ($million) $182 $871 $10,525 $19,003 $21,166
Repayments of long-term debt ($million) -$155 -$1,166 -$1,553 -$1,590 -$1,258
Other financing activities ($million) -$7,786 -$9,655 -$10,695 -$11,325 -$8,189
Net Cash Flows-Financing ($million) -$7,686 -$10,066 -$1,104 $6,291 $9,718
Effect of Exchange Rate ($million) -$1,093 -$364 $618 $70 -$351
Net Cash Flow ($million) $10,317 $4,237 $5,967 -$5,900 $17,776
Income statement
Year end date 31/12/2018 31/12/2019 31/12/2020 31/12/2021 31/12/2022
Total Revenue ($million) $232,887 $280,522 $386,064 $469,822 $513,983
Cost of Revenue ($million) $139,156 $165,536 $233,307 $272,344 $288,831
Gross Profit ($million) $93,731 $114,986 $152,757 $197,478 $225,152
Operating Expenses
Fulfillment ($million) $34,027 $40,232 $58,517 $75,111 $84,299
Technology and content ($million) $28,837 $35,931 $42,740 $56,052 $73,213
Sales, General and admin. ($million) $18,150 $24,081 $28,676 $41,372 $54,129
Other Operating Items ($million) $296 $201 -$75 $62 $1,263
Operating Income $12,421 $14,541 $22,899 $24,879 $12,248
Interest income and other $257 $1035 $2926 $15081 -$15817
Earnings Before Interest and Tax $12,678 $15,576 $25,825 $39,960 -$3,569
Interest Expense -$1,417 -$1,600 -$1,647 -$1,809 -$2,367
Earnings Before Tax $11,261 $13,976 $24,178 $38,151 -$5,936
Net Income Tax -$1,188 -$2,388 -$2,847 -$4,787 $3,214
Net Income $10,073 $11,588 $21,331 $33,364 -$2,722
Net Income Applicable to Common Shareholders $10,073 $11,588 $21,331 $33,364 -$2,722
Financial ratios
Year end date 31/12/2018 31/12/2019 31/12/2020 31/12/2021 31/12/2022
Liquidity Ratios
Current Ratio 110% 110% 105% 114% 94%
Quick Ratio 85% 86% 86% 91% 72%
Cash Ratio 46% 41% 33% 25% 35%
Profitability Ratios
Gross Margin 40% 41% 40% 42% 44%
Operating Margin 5% 5% 6% 5% 2%
Pre-Tax Margin 5% 5% 6% 8% -1%
Profit Margin 4% 4% 6% 7% -1%
Pre-Tax ROE 26% 23% 26% 28% -4%
After Tax ROE 23% 19% 23% 24% -2%

All financial data were retrieved from the annual reports that Amazon, Inc released at the end of each financial year.

ESG FactorsEdit

Environmental Factors:

  1. Carbon Footprint and Climate Change: Amazon has committed to several environmental goals, including being net-zero carbon by 2040 and achieving 100% renewable energy usage. The company is investing in renewable energy projects and implementing energy-efficient technologies across its operations.
  2. Waste Reduction and Recycling: Amazon is working towards reducing waste and increasing recycling rates. It has introduced initiatives like Frustration-Free Packaging, which reduces packaging waste, and the Amazon Second Chance program, which encourages customers to recycle electronics and other products.
  3. Sustainable Supply Chain: Amazon aims to promote sustainability throughout its supply chain by encouraging suppliers to adopt environmentally responsible practices. The company focuses on responsible sourcing, reducing packaging waste, and optimizing transportation to minimize environmental impact.

Social Factors:

  1. Workforce Development: Amazon is committed to creating a diverse, inclusive, and safe work environment for its employees. The company invests in workforce development programs, training initiatives, and career advancement opportunities.
  2. Labour Practices: There have been ongoing discussions regarding labour practices at Amazon. Critics raise concerns about employee working conditions and labour rights. The company is taking steps to address these concerns and has increased minimum wage for its employees.
  3. Community Engagement: Amazon supports local communities through various initiatives, including philanthropy, job creation, and infrastructure development. The company also engages in disaster relief efforts and supports educational programs in underserved communities.

Governance Factors:

  1. Board Structure and Independence: Amazon's board is composed of directors with diverse backgrounds and expertise. The company emphasizes the importance of independent directors and maintains a strong governance structure.
  2. Transparency and Reporting: Amazon publishes an annual sustainability report that provides detailed information on its ESG initiatives, progress, and challenges. The company strives to maintain transparency in its reporting and regularly engages with stakeholders.
  3. Data Privacy and Security: As a technology-driven company, Amazon faces scrutiny over data privacy and security practices. It is committed to protecting customer data and complying with relevant regulations.

Amazon recognizes the importance of ESG factors and has made significant strides in addressing environmental, social, and governance challenges. The company's commitment to reducing its carbon footprint, promoting workforce development, engaging with communities, and maintaining strong governance practices is commendable. However, there are areas where Amazon can further improve, such as addressing labor concerns and enhancing data privacy practices. By continuing to prioritize ESG factors and implementing sustainable practices, Amazon can further strengthen its position as a responsible corporate citizen and contribute to a more sustainable and inclusive future.

References and notesEdit

  1. ↑
  2. ↑
  3. ↑
  4. ↑
  5. ↑ https://fourweekmba.com/amazon-revenue-breakdown/
  6. ↑ https://www.t4.ai/companies/amazon-market-share#:~:text=Amazon%27s%20Market%20Share%20in%20E,Streaming%20%2D%2013%25%20in%202019.
  7. ↑ https://aag-it.com/the-latest-cloud-computing-statistics/#:~:text=AWS%20remains%20the%20most%20popular,%2C%20with%20revenue%20up%2024%25.
  8. ↑ 8.0 8.1 https://financesonline.com/amazon-statistics/
  9. ↑ https://sustainabilitymag.com/renewable-energy/amazon-announces-71-new-projects-for-renewable-energy
  10. ↑ https://www.aboutamazon.com/news/innovation-at-amazon/what-is-amazon-project-kuiper
  11. ↑ https://www.aboutamazon.com/news/innovation-at-amazon/introducing-the-1-billion-amazon-industrial-innovation-fund
  12. ↑ https://ir.aboutamazon.com/officers-and-directors/default.aspx
  13. ↑ https://s2.q4cdn.com/299287126/files/doc_financials/2023/ar/Amazon-2023-Proxy-Statement.pdf
  14. ↑ Amazon.com, Inc. (AMZN) Stock Major Holders - Yahoo Finance
  15. ↑ Why Is Amazon Losing Money In 2022? (marketrealist.com)
  16. ↑ Amazon.com, Inc. - Annual reports, proxies and shareholder letters (aboutamazon.com)
  17. ↑ https://www.wsj.com/market-data/quotes/AMZN/financials/annual/income-statement
  18. ↑ https://www.wsj.com/market-data/quotes/AMZN/financials/annual/cash-flow
  19. ↑ 19.0 19.1 https://valueinvesting.io/AMZN/valuation/dcf-growth-exit-5y
  20. ↑ 20.0 20.1 https://ycharts.com/indicators/5_year_treasury_rate#:~:text=5%20Year%20Treasury%20Rate%20(I%3A5YTCMR)&text=5%20Year%20Treasury%20Rate%20is,long%20term%20average%20of%203.74%25.
  21. ↑ 21.0 21.1 https://valueinvesting.io/AMZN/valuation/wacc
  22. ↑ 22.0 22.1 https://valueinvesting.io/AMZN/valuation/wacc
  23. ↑ 23.0 23.1 https://www.theguardian.com/business/2023/jun/14/fed-interest-rate-pause-inflation#:~:text=US%20Federal%20Reserve%20officials%20have,year%20of%20consecutive%20rate%20increases.
  24. ↑ https://www.marketwatch.com/investing/stock/amzn
  25. ↑ https://www.shopify.com/blog/amazon-competitors
  26. ↑ https://finbox.com/NASDAQGS:AMZN/explorer/pe_ltm/
  27. ↑ https://www.macrotrends.net/stocks/charts/AMZN/amazon/eps-earnings-per-share-diluted
  28. ↑ 28.0 28.1 https://finance.yahoo.com/quote/AMZN/analysis/
  29. ↑ https://www.macrotrends.net/stocks/charts/AMZN/amazon/revenue
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