Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Recommendation: Buy
Current Price: $787.75
Target Price: $797.45
Business Description
Amazon.com Inc. is an American company with
two main business lines, e-commerce retail and
cloud computing. Amazon was founded in 1994
by Jeff Bezos and is headquartered in Washington,
Seattle U.S.A. The e-commerce company has
business units all around the world including
countries like Australia, Brazil, Canada, China,
France, Germany, India, Italy, Japan, Mexico,
Netherlands, United Kingdom and Spain. With the
coming of the Internet, Amazon saw the future of
online retailing and has become the strongest ecommerce company, introducing later cloud
computing services and other business lines.
Strengths
Weaknesses
Opportunities
Threats
Market risk
Interest rates
Currencies Risk
E-commerce decreasing demand
Assumptions
The assumptions used to forecast Amazons
statement for the next 5 years is that it will grow
gradually, but sometimes their sales can decrease
from year to year. The market will fluctuate due to
economic conditions and this will affect their
sales, however a constant growth seems likely in
their horizons. To forecast Amazons balance
sheet we used Amazons past performance in
years 2014 and 2015. We have forecasted their
balance sheet for the next five years by estimating
a growth rate for each year from historical balance
sheet growth rates to be around 20% which
growing consistently with historical
values. Because the company is famous for
launching the availability of same day delivery
service a couple of years ago, their revenue has
Firm Valuation
Based on TTM%
P/E
PEG
EBITDA
Amazon.com
196.2
15.44
$ 8,308
MM
eBay
19.3
839.13
$ 705 MM
Alibaba
37.3
316.10
$ 2,381
MM
Ratio Analysis
The 3 ratios, we found relevant to such huge retail
stores, are current ratio, asset turnover, and return
on equity. Firstly, the current ratio gives a great
measurement how the companies are able to pay
off their soon-maturing debt. As the numbers
indicate, Amazon has been doing worse than its
main competitors, Alibaba and Ebay. Amazon
actually has shown a slightly downward trend in
the recent years, while the others had a great year
in 2015 and have shown a slight decrease this
year. Secondly, the comparison of Asset Turnover
implies that Amazon has been performing better
than its 2 peers with higher numbers. This ratio is
important, because it measures how effectively a
company can use all of its assets to generate
sales. However, the numbers in the analyzed
years reveal a decreasing trend which seems to
continue in the last quarter of 2016. Lastly, our
team decided to choose one of the most wellknown profitability measurements, the ROE. The
greater the percentage, the greater amount of net
income goes to the shareholders. In this
comparison, Amazon is behind their peers in this
race, but as the analysis implies, they show an
upward trend, while their competitors show a
downward trend. Hence, Amazon may be able to
overtake them in the upcoming years. It will be an
interesting competition to watch in the future!
Conclusion
In conclusion, Amazon is a great company with
tremendous market capitalization and an even
more astonishing growth rate. We believe that
Amazon stock is a BUY despite the current,
slightly volatile state of the market. Amazon stock
is currently trading at $787.75 despite our target
price of $797.45 showing that Amazon stock is
undervalued.
Comparison to Competitors
In comparison to its competitors Alibaba and
EBay, Amazon is clearly the stronger opponent.
Amazon has a market capitalization that is
approximately ~90 billion higher than Alibaba and
approximately ~300 billion higher than EBay.
Amazon controls approximately 74.1% of e-
commerce sales in the United States with ecommerce sales of about $79,268 Million. In
addition, Amazon is clearly the stronger opponent
in terms of growth with Price/Earnings ratios
surpassing Alibaba and EBay (as shown in
Valuation) which shows that investors are
anticipating higher growth in the future. Amazons
PEG ratio in comparison to their competitors
shows that it has a higher growth rate to justify
their higher Price/Earnings ratio which hints to
their stock being undervalued.
Market Giant
Amazon is a massive company as shown by their
market capitalization of $363.05 Billion. Despite
their size, being similar to many public companies
such as Johnson & Johnson, Berkshire Hathaway,
and General Electric which have long term growth
forecasts around 12% Amazon has a projected
long term growth forecast of about 50%. This is
because Amazon has been able to expand their
horizons in preparation for future trends. Just this
year they have plans to expand and open around
15 new fulfillment centers all over the United
States. They have been very active in expanding
into new markets; they have plans to open 2000
grocery stores over the next decade, they have
expanded into the food delivery markets by
expanding the service AmazonFresh into Chicago
and Dallas, and theyve recently collaborated with
TheStreet in collaboration with their Echo Dot.
This shows that Amazon is constantly looking into
expanding into new markets to expand and remain
current with trends and this is what is accelerating
their growth.
Balance Sheet
Amazon is a safe option for a BUY despite its
ambitious plans for the future. In the third quarter
they have had about $18.3 billion in total cash and
short term investments showcasing their liquidity
profile in comparison to their total debt of about
$18.9 billion in the third quarter. During this time,
they have also generated free cash flow of 8.46
billion.
Sources
Griffin, Aidan U. "How Many Products Does Amazon Actually Carry? | 360pi." 360pi. Ketner
Group PR + Marketing, 12 July 2016. Web. 09 Nov. 2016.
"Amazon.Com, Inc.." International Directory of Company Histories. . Encyclopedia.com. 9 Nov.
2016 <http://www.encyclopedia.com>.
Jurevicius, Ovidijus. "Learning from Amazon's Advantage 2016 SWOT Analysis." Strategic
Management Insight. N.p., 19 Oct. 2016. Web. 09 Nov. 2016.
Lajoie, Marc, and Nick Shearman. "What Is Alibaba?" - WSJ.com. N.p., n.d. Web. 09 Nov. 2016.
"Ebay Inc Income Statement Quarterly Report." Ebay Inc (EBAY) Income Statement Sep 30 2016
Quarterly Financial Results. N.p., n.d. Web. 09 Nov. 2016.
"How Amazon Plans On Driving Future Growth." Forbes. Forbes Magazine, 15 May 2015.
Web. 09 Nov. 2016.
Vigna, Paul. "Amazons Big, Profitable Future May Finally Be Approaching Citi." WSJ.
Wsj.com, 07 Dec. 2015. Web. 09 Nov. 2016.
"Alibaba Group Holding Ltd ADR." Growth, Profitability, and Financial Ratios for (BABA)
from Morningstar.com. N.p., n.d. Web. 09 Nov. 2016.
"EBay Inc." Growth, Profitability, and Financial Ratios for (EBAY) from Morningstar.com.
N.p., n.d. Web. 09 Nov. 2016.
Zaczkiewicz, Arthur. "Amazon, Wal-Mart Lead Top 25 E-commerce Retail List." WWD.
Womens Wear Daily, 11 Mar. 2016. Web. 09 Nov. 2016.
WACC AMAZON
Dec-31-2015 USD
Value
Equity
Debt
374,176
8,235
Interest Expense
Tax Rate
Weight
0.98
0.02
459
40.44%
AMAZON
RF
1.79%
1.49
6.65%
RM
Calculation
After Tax
x ( 1 - 40.44%)
3.32%
9.03%
3.32%
CAPITAL STRUCTURE
Yahoo Finance
WACC
2%
8.91%
0.98
0.02
98%
Equity
Debt
380,848
8.91% WACC
39,443
Year
1
2
3
4
5
6
FCF
47,302.88
58,175.22
70,186.96
85,342.19
103,604.23
105,751.14
PV
43,433.64
49,047.32
54,334.07
60,662.21
67,619.28
105,751.14
Calculated Value 380,848
Amazon PM
Outstanding Shares
Market Value
14-Dec
Dec-15
Forcasted Growth
Year 1
18.2%
Sales Revenue
Operating Costs
EBTD
57,842.20
69,553.90
82,212.71
Depreciation
6,281.00
6,281.00
6,281.00
EBT
51,561.20
63,272.90
75,931.71
Taxes
Net Income
30,709.85
Change in NWC
Free OCF
32,467.85
37,685.34
39,443.34
45,224.93
47,302.88
Revenue year 0
Operating Margin
Tax Rate
Change in NWC
Depreciation
107,006.00
35% Assuming constant operating marging rate
40.44%
-1758 Asuming same percentage changes in NWC
6281 Assuming no increse in annual depreciation
Accounts receivable
Inventory
Accounts payable
2014
2015
5,612 6,425
8,299 10,243
16,459 20,397
Accrued liabilities
9,807 10,384
TCF
105,751.14
Balance Sheet
Balance Sheet as of:
Reclassified
Dec-31-2011
Dec-31-2012
USD
USD
5,269.0
8,084.0
4,307.0
3,364.0
9,576.0
11,448.0
Accounts Receivable
2,571.0
3,817.0
Total Receivables
2,571.0
3,817.0
4,992.0
6,031.0
351.0
17,490.0
21,296.0
Currency
ASSETS
Inventory
Deferred Tax Assets, Curr.
Other Current Assets
Total Current Assets
Long-term Investments
Goodwill
Other Intangibles
Deferred Tax Assets, LT
Other Long-Term Assets
Total Assets
5,786.0
9,582.0
(1,369.0)
(2,522.0)
4,417.0
7,060.0
1,955.0
2,552.0
647.0
725.0
28.0
741.0
922.0
25,278.0
32,555.0
11,145.0
13,318.0
2,372.0
3,213.0
129.0
579.0
1,250.0
1,892.0
14,896.0
19,002.0
255.0
3,084.0
1,160.0
746.0
LIABILITIES
Accounts Payable
Accrued Exp.
Curr. Port. of LT Debt
Curr. Port. of Cap. Leases
Unearned Revenue, Current
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Capital Leases
476.0
1,210.0
1,055.0
17,521.0
24,363.0
5.0
5.0
6,990.0
8,347.0
Retained Earnings
1,955.0
1,916.0
Treasury Stock
(877.0)
(1,837.0)
(316.0)
(239.0)
7,757.0
8,192.0
7,757.0
8,192.0
25,278.0
32,555.0
Common Stock
Total Equity
Key Ratios
Industry
Liquidity
Current Ratio
Efficiency
Total Asset Turnover
Profitability
ROE
Current Ratio
Industry
Amazon
2014
1.66
1.12
2015
3.54
1.08
2016
2.81
1.08
Current Ratio
3.5
3
2.5
2
Industry
1.5
Amazon
1
0.5
0.5
0
2014
2015
2016
Year 2
Year 3
21.3%
19.4%
Year 4
20.5%
Year 5
20.5%
Year6
2%
6,281.00
6,281.00
93,443.02
6,281.00
6,281.00
6,281.00
67,177.41
81,715.68
99,234.29
101,293.80
70,186.96
85,342.19
103,604.23 105,751.14
577
18.2%
21.3%
Dec-31-2013
Dec-31-2014
Dec-31-2015
Dec-31-2016
Dec-31-2017
USD
USD
USD
USD
USD
8,658.0
14,557.0
15,890.0
18,782.0
22,782.5
3,789.0
2,859.0
3,918.0
4,631.1
5,617.5
12,447.0
17,416.0
19,808.0
23,413.1
28,400.0
4,767.0
5,612.0
6,423.0
7,592.0
9,209.1
4,767.0
5,612.0
6,423.0
7,592.0
9,209.1
7,411.0
8,299.0
10,243.0
12,107.2
14,686.1
24,625.0
31,327.0
36,474.0
43,112.3
52,295.2
14,809.0
22,730.0
30,053.0
35,522.6
43,089.0
(3,860.0)
(5,763.0)
(8,215.0)
(9,710.1)
(11,778.4)
10,949.0
16,967.0
21,838.0
25,812.5
31,310.6
2,655.0
3,319.0
3,759.0
4,443.1
5,389.5
645.0
764.0
762.0
900.7
1,092.5
1,285.0
2,128.0
2,611.0
3,086.2
3,743.6
40,159.0
54,505.0
65,444.0
77,354.8
93,831.4
15,133.0
16,459.0
20,397.0
24,109.3
29,244.5
4,535.0
6,587.0
5,020.0
5,933.6
7,197.5
753.0
1,520.0
238.0
281.3
341.2
3,126.0
3,694.9
4,482.0
2,559.0
3,523.0
5,118.0
6,049.5
7,338.0
22,980.0
28,089.0
33,899.0
40,068.6
48,603.2
3,191.0
8,265.0
8,235.0
9,733.8
11,807.1
1,990.0
4,224.0
5,948.0
7,030.5
8,528.0
571.0
1,021.0
1,084.0
1,281.3
1,554.2
1,681.0
2,165.0
2,894.0
3,420.7
4,149.3
30,413.0
43,764.0
52,060.0
61,534.9
74,641.9
5.0
5.0
5.0
5.9
7.2
9,573.0
11,135.0
13,394.0
15,831.7
19,203.9
2,190.0
1,949.0
2,545.0
3,008.2
3,648.9
(1,837.0)
(1,837.0)
(1,837.0)
(2,171.3)
(2,633.8)
(185.0)
(511.0)
(723.0)
(854.6)
(1,036.6)
9,746.0
10,741.0
13,384.0
15,819.9
19,189.5
9,746.0
10,741.0
13,384.0
15,819.9
19,189.5
40,159.0
54,505.0
65,444.0
77,354.8
93,831.4
Industry
Amazon
Forecast
Dec-31-2014
Dec-31-2015
1.66
3.54
2.81
1.12
0.41
0.52
0.39
1.88
19.34%
26.84%
21.13%
8.21%
2014
0.41
1.88
2015
0.52
1.78
2016
0.39
1.64
Asset Turnover
Industry
Amazon
Dec-31-2016
Dec-31-2014
Asset Turnover
2
1.5
1
Industry
Amazon
0.5
0
2014
2015
2016
19.4%
20.5%
20.5%
2.0%
Dec-31-2018
Dec-31-2019
Dec-31-2020
Dec-31-2021
USD
USD
USD
USD
27,202.4
32,778.8
39,498.5
40,288.5
6,707.3
8,082.3
9,739.2
9,933.9
33,909.6
40,861.1
49,237.7
50,222.4
10,995.6
13,249.7
15,965.9
16,285.3
10,995.6
13,249.7
15,965.9
16,285.3
17,535.2
21,129.9
25,461.5
25,970.7
62,440.4
75,240.7
90,665.1
92,478.4
51,448.2
61,995.1
74,704.1
76,198.2
(14,063.4)
(16,946.4)
(20,420.4)
(20,828.8)
37,384.8
45,048.7
54,283.7
55,369.4
6,435.1
7,754.3
9,343.9
9,530.8
1,304.5
1,571.9
1,894.1
1,932.0
4,469.8
5,386.1
6,490.3
6,620.1
112,034.7
135,001.8
162,677.1
165,930.7
34,918.0
42,076.1
50,701.8
51,715.8
8,593.8
10,355.6
12,478.4
12,728.0
407.4
491.0
591.6
603.4
5,351.5
6,448.5
7,770.4
7,925.8
8,761.6
10,557.7
12,722.0
12,976.5
58,032.3
69,928.9
84,264.3
85,949.6
14,097.6
16,987.6
20,470.1
20,879.5
10,182.5
12,269.9
14,785.2
15,080.9
1,855.7
2,236.1
2,694.5
2,748.4
4,954.3
5,969.9
7,193.7
7,337.6
89,122.4
107,392.5
129,407.9
131,996.1
8.6
10.3
12.4
12.7
22,929.4
27,629.9
33,294.1
33,960.0
4,356.8
5,250.0
6,326.2
6,452.7
(3,144.8)
(3,789.5)
(4,566.3)
(4,657.6)
(1,237.7)
(1,491.4)
(1,797.2)
(1,833.1)
22,912.3
27,609.3
33,269.2
33,934.6
22,912.3
27,609.3
33,269.2
33,934.6
112,034.7
135,001.8
162,677.1
165,930.7
2014
19.34%
8.21%
2015
26.84%
10.07%
Forecast
Dec-31-2015
Dec-31-2016
1.08
1.08
1.78
1.64
10.07%
12.09%
ROE
Industry
Amazon
2016
21.13%
12.09%
ROE
30.00%
25.00%
20.00%
Industry
15.00%
Industry
Amazon
10.00%
Amazon
5.00%
5.00%
0.00%
2014
2015
2016
Dec-31-2014
USD
Dec-31-2015
USD
Dec-31-2016
USD
14,557.0
2,859.0
17,416.0
15,890.0
3,918.0
19,808.0
18,782.0
4,631.1
23,413.1
5,612.0
5,612.0
6,423.0
6,423.0
7,592.0
7,592.0
Inventory
Deferred Tax Assets, Curr.
Other Current Assets
Total Current Assets
8,299.0
31,327.0
10,243.0
36,474.0
12,107.2
43,112.3
22,730.0
(5,763.0)
16,967.0
30,053.0
(8,215.0)
21,838.0
35,522.6
(9,710.1)
25,812.5
Long-term Investments
Goodwill
Other Intangibles
Deferred Tax Assets, LT
Other Long-Term Assets
Total Assets
3,319.0
764.0
2,128.0
54,505.0
3,759.0
762.0
2,611.0
65,444.0
4,443.1
900.7
3,086.2
77,354.8
LIABILITIES
Accounts Payable
Accrued Exp.
Curr. Port. of LT Debt
Curr. Port. of Cap. Leases
Unearned Revenue, Current
Other Current Liabilities
Total Current Liabilities
16,459.0
6,587.0
1,520.0
3,523.0
28,089.0
20,397.0
5,020.0
238.0
3,126.0
5,118.0
33,899.0
24,109.3
5,933.6
281.3
3,694.9
6,049.5
40,068.6
Long-Term Debt
Capital Leases
Def. Tax Liability, Non-Curr.
Other Non-Current Liabilities
Total Liabilities
8,265.0
4,224.0
1,021.0
2,165.0
43,764.0
8,235.0
5,948.0
1,084.0
2,894.0
52,060.0
9,733.8
7,030.5
1,281.3
3,420.7
61,534.9
Common Stock
Additional Paid In Capital
Retained Earnings
Treasury Stock
Comprehensive Inc. and Other
Total Common Equity
5.0
11,135.0
1,949.0
(1,837.0)
(511.0)
10,741.0
5.0
13,394.0
2,545.0
(1,837.0)
(723.0)
13,384.0
5.9
15,831.7
3,008.2
(2,171.3)
(854.6)
15,819.9
Total Equity
10,741.0
13,384.0
15,819.9
54,505.0
65,444.0
77,354.8
ASSETS
Cash And Equivalents
Short Term Investments
Total Cash & ST Investments
Accounts Receivable
Total Receivables
19.4%
20.5%
20.5%
Dec-31-2017
USD
Dec-31-2018
USD
Dec-31-2019
USD
Dec-31-2020
USD
22,782.5
5,617.5
28,400.0
27,202.4
6,707.3
33,909.6
32,778.8
8,082.3
40,861.1
39,498.5
9,739.2
49,237.7
9,209.1
9,209.1
10,995.6
10,995.6
13,249.7
13,249.7
15,965.9
15,965.9
14,686.1
52,295.2
17,535.2
62,440.4
21,129.9
75,240.7
25,461.5
90,665.1
43,089.0
(11,778.4)
31,310.6
51,448.2
(14,063.4)
37,384.8
61,995.1
(16,946.4)
45,048.7
74,704.1
(20,420.4)
54,283.7
5,389.5
1,092.5
3,743.6
93,831.4
6,435.1
1,304.5
4,469.8
112,034.7
7,754.3
1,571.9
5,386.1
135,001.8
9,343.9
1,894.1
6,490.3
162,677.1
29,244.5
7,197.5
341.2
4,482.0
7,338.0
48,603.2
34,918.0
8,593.8
407.4
5,351.5
8,761.6
58,032.3
42,076.1
10,355.6
491.0
6,448.5
10,557.7
69,928.9
50,701.8
12,478.4
591.6
7,770.4
12,722.0
84,264.3
11,807.1
8,528.0
1,554.2
4,149.3
74,641.9
14,097.6
10,182.5
1,855.7
4,954.3
89,122.4
16,987.6
12,269.9
2,236.1
5,969.9
107,392.5
20,470.1
14,785.2
2,694.5
7,193.7
129,407.9
7.2
19,203.9
3,648.9
(2,633.8)
(1,036.6)
19,189.5
8.6
22,929.4
4,356.8
(3,144.8)
(1,237.7)
22,912.3
10.3
27,629.9
5,250.0
(3,789.5)
(1,491.4)
27,609.3
12.4
33,294.1
6,326.2
(4,566.3)
(1,797.2)
33,269.2
19,189.5
22,912.3
27,609.3
33,269.2
93,831.4
112,034.7
135,001.8
162,677.1