Amazon.com, Inc.

AMZN Details

Amazon.com, Inc. (NASDAQ: AMZN) is a significant online retailer and one of the top e-commerce aggregators, with USD 386 billion in net sales and an expected physical/digital online gross merchandise volume (GMV) of USD 578 billion in 2021. North America, International, and Amazon Web Services (AWS) are the company's three segments. It caters to customers through its online and physical storefronts, focusing on selection, cost, and ease of use.

Latest News:

• Stock Split: AMZN's board approved a 20-for-1 stock split on March 9, 2022, and permitted the e-commerce behemoth to repurchase up to USD 10 billion in common stock. Each company shareholder of record at the close of business on May 27, 2022, will receive 19 extra shares for every one share held as of that date, subject to shareholder approval of the Amendment, which will be recorded in their accounts on or about June 3, 2022. On June 6, 2022, split-adjusted trading is planned to begin.
• Stock Repurchase: AMZN stated on March 9, 2022, that it would buy back up to USD 10 billion in common stock. The company repurchased USD 2.12 billion of its shares under the prior USD 5 billion stock repurchase authorization, which the Board of Directors granted in 2016.

Robust FY21 Results:

• Rise in Revenues: The company's total net sales climbed 21.70% YoY to USD 469.82 billion in FY21 (ended December 31, 2021), up from USD 386.06 billion in FY20, due to growth in both products and services segments.
• Surge in Net Income: The company reported a significant rise in net income to USD 33.36 billion in FY21 from USD 21.22 billion in FY20.
• Strong Balance Sheet: The company had USD 96.05 billion in cash and cash equivalents (including marketable securities) as of December 31, 2021, and USD 65.91 billion in total debt.

Key Risks:

• Inventory Risk: Seasonality, new product releases, quick changes in product cycles and price, variations in consumer demand and consumer spending patterns, spoilage, and other variables expose the company to considerable inventory risks that could negatively impact its operating margins.

Outlook

• Q1FY22 Estimates: AMZN expects Q1FY22 net sales to range between USD 112 and 117 billion, with operating income ranging between USD 3.0 and 6.0 billion. This includes approximately USD 1.0 billion lower depreciation expense due to increases in the estimated useful lives of its servers and networking equipment.

Valuation Methodology: Price/Cash Flow Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

AMZN's share price has remained stable throughout the year, fallen 15.12% in the past three months and is currently leaning close to the lower end of its 52-week range of USD 2,671.45 to USD 3,773.08. We have valued the stock using the Price/Cash Flow multiple based relative valuation methodology and arrived at a target price of USD 3,3328.20.

Considering the company's market dominance in commerce space, geopolitical risks, healthy balance sheet, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the current price of USD 2,957.00, up 6.15% as of March 10, 2022, 2:47 PM ET. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing.

Three-Year Technical Price Chart (as of March 10, 2022, at 2:47 PM ET). Source: REFINITIV, Analysis by Kalkine Group

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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