Amazon stock analysis. Ticker: AMZN.
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Amazon stock is up 65% this year taking shares up to $138. At that price the company has a market cap of 1.42 trillion.
The balance sheet has 54 billion of cash and 18 billion of investments as well as 67 billion of debt so the enterprise value is also 1.42 trillion.
Revenue over the last 12 months is 538 billion, with 13.1 billion of net income, 63 billion of adjusted ebitda and 3.2 billion of free cash flow.
So Amazon stock is valued at 2.6 times revenue, 22 times ebitda and 101 times earnings.
Valuing the stock based on these company-wide metrics isn’t that useful, however, for two reasons. First, Amazon continues to reinvest its profits back into the business and that skews its price to earnings ratio.
Second, Amazon is made up of several different businesses and each one has different profit margins and growth rates.
It’s online stores segment includes product sales such as books, videos, games, music and software. This segment contributes the most amount of revenue, 222 billion over the last 12 months but it’s also the least profitable and it grew only 4% in the latest quarter.
It’s third-party seller service includes product and fulfilment fees and contributes 127 billion of revenue at a growth rate of 18% year over year. We don’t know precisely what the profit margins are but 3rd party services is clearly a strong business. Unit volume was up 60% over the quarter and Amazon fulfillment has been taking share from traditional carriers like Fedex and UPS.
Amazon Web services provides on-demand cloud computing and is Amazon’s most profitable segment with operating margins of 24% in the latest quarter. This segment grew 12% to 85 billion of annual revenue.
#amznstock #stockstobuy #investing #overlookedalpha
Join 9000+ investors: https://www.overlookedalpha.com
Amazon stock is up 65% this year taking shares up to $138. At that price the company has a market cap of 1.42 trillion.
The balance sheet has 54 billion of cash and 18 billion of investments as well as 67 billion of debt so the enterprise value is also 1.42 trillion.
Revenue over the last 12 months is 538 billion, with 13.1 billion of net income, 63 billion of adjusted ebitda and 3.2 billion of free cash flow.
So Amazon stock is valued at 2.6 times revenue, 22 times ebitda and 101 times earnings.
Valuing the stock based on these company-wide metrics isn’t that useful, however, for two reasons. First, Amazon continues to reinvest its profits back into the business and that skews its price to earnings ratio.
Second, Amazon is made up of several different businesses and each one has different profit margins and growth rates.
It’s online stores segment includes product sales such as books, videos, games, music and software. This segment contributes the most amount of revenue, 222 billion over the last 12 months but it’s also the least profitable and it grew only 4% in the latest quarter.
It’s third-party seller service includes product and fulfilment fees and contributes 127 billion of revenue at a growth rate of 18% year over year. We don’t know precisely what the profit margins are but 3rd party services is clearly a strong business. Unit volume was up 60% over the quarter and Amazon fulfillment has been taking share from traditional carriers like Fedex and UPS.
Amazon Web services provides on-demand cloud computing and is Amazon’s most profitable segment with operating margins of 24% in the latest quarter. This segment grew 12% to 85 billion of annual revenue.
#amznstock #stockstobuy #investing #overlookedalpha
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NewsTranscript
00:00 Amazon's stock is up 65% this year taking shares up to $138. At that price the company
00:06 has a market cap of $1.42 trillion. The balance sheet has $54 billion of cash and $18 billion
00:12 of investments as well as $67 billion of debt so the enterprise value is also $1.42 trillion.
00:20 Revenue over the last 12 months is $538 billion with $13.1 billion of net income, $63 billion
00:27 of adjusted EBITDA and $3.2 billion of free cash flow. So Amazon's stock is valued at
00:33 2.6 times revenue, 22 times EBITDA and 101 times earnings.
00:39 Valuing the stock based on these company wide metrics isn't that useful however for two
00:45 reasons. First, Amazon continues to reinvest its profits back into the business and that
00:50 skews its price to earnings ratio. Second, Amazon is made up of several different businesses
00:56 and each one has different profit margins and growth rates. Its online stores segment
01:01 includes product sales such as books, videos, games, music and software. This segment contributes
01:07 the most amount of revenue $222 billion over the last 12 months but it's also the least
01:13 profitable and it grew only 4% in the latest quarter. Its third party seller service includes
01:19 product and fulfillment fees and contributes $127 billion of revenue at a growth rate of
01:25 18% year over year. We don't know precisely what the profit margins are but third party
01:30 services is clearly a strong business and Amazon Fulfillment has been taking share from
01:35 traditional carriers like FedEx and UPS. Amazon Web Services provides on demand cloud
01:41 computing and is Amazon's most profitable segment with operating margins of 24% in the
01:47 latest quarter. This segment grew 12% to $85 billion of annual revenue. The advertising
01:53 segment makes money from ads placed within the Amazon ecosystem. Revenue from this segment
01:57 is 7% of the total at $41 billion but it's growing fast with a quarterly growth rate
02:03 of 22%. Subscriptions which include services such as Amazon Prime produced $38 billion
02:09 of revenue with growth at 14% while Amazon Physical Stores generated $20 billion with
02:15 growth of 6%. Total Amazon revenue is rounded off with its other segment which includes
02:21 healthcare services and contributed another $5 billion to trailing 12 month revenue.
02:27 All told Amazon's revenue expanded by 11% in the latest quarter and its operating income
02:32 more than doubled to $7.7 billion. The most surprising thing is that the improvement in
02:37 operating income wasn't driven by AWS or third party services. A large part of the
02:43 improvement came from Amazon's retail business. Restructuring of retail supply chains helped
02:49 the company to reduce delivery times as well as improved margins.
02:53 What this really reveals is the power of Amazon's business model. It's got multiple businesses
02:59 and plenty of strings to pull to keep the company moving. And while Amazon's stock
03:03 has climbed 65% this year, its valuation compared to revenue is still relatively depressed and
03:10 its valuation compared to EBITDA is not that far from a 10 year low.
03:15 Overall Amazon continues to head in the right direction and I continue to rate the stock
03:19 a buy. But these are my personal opinions not financial advice and I do hold shares
03:24 in the stock. For more detailed investing ideas make sure to visit our website overlookedalpha.com