Amazon retail business has picked up as consumers prefer online contactless purchases to going to the store due to the Covid-19 pandemic. The company also recruited nearly 175,000 in their fulfillment and delivery network in response to increased customer demand. The company also has increased costs due to the pandemic as they make changes in processes and invest in equipment to make sure the employees stay healthy.
Amazon's (NASDAQ:AMZN) Net sales for Q1 2020 increased 26% to $75.5 billion, compared with $59.7 billion in the same period of the previous year. Excluding the $387 million unfavorable impact from y-o-y changes in foreign exchange rates throughout the quarter, net sales increased 27% compared to the same period of the previous year. Operating income decreased to $4 billion, compared with operating income of $4.4 billion in the same period of the previous year. Net income fell to $2.5 billion, or $5.01 per diluted share, compared with net income of $3.6 billion, or $7.09 per diluted share, in the same period of the previous year.
Below are key drivers of Amazon's value that present opportunities for upside or downside to the current Trefis price estimate for Amazon:
For additional details, select a driver above or select a division from the interactive Trefis split for Amazon at the top of the page.
Amazon is an online retailer which sells electronics, books, retail consumer goods, music, games, apparel and other merchandise to consumers in the U.S., Canada, the United Kingdom, Germany, Brazil, France, China, Japan, India Mexico, Netherlands, Italy and other countries. The company also provides web services such as cloud computing and online storage to web sites and web developers.
Amazon Web Services business is the most valuable segment for Amazon due to the company's high growth within this segment. In recent years, consolidated AWS revenues have grown at high double digits. Despite the lowest revenue contribution, AWS is the most valuable segment due to high margins of cloud computing as compared to e-commerce retail business which operates on razor thin margins.
The growth in Amazon's Web Services has become a critical factor driving the company's expansion globally. Several companies continued to adopt these services in recent years. Besides helping big businesses, the company’s cost efficient web services are also useful for young start-ups that may have cash restrictions.
The growth in the AWS segment has been massive - the annual growth in AWS revenues came in at 70% in 2015, 55% in 2016, 43% in 2017 and 46% in 2018. Apart from this, the company also showed strong profitability in the cloud-services business as margins have improved in this segment in successive years.
Prime subscriptions grew by 53% and 51% year-over-year in 2014 and 2015, respectively, with stronger growth across international markets than within the U.S. Amazon's total Prime members (not reported by the company) was estimated to be 50 million in 2015, which increased to 65-70 million in 2016 and subsequently to over 100 million by the end of 2018. The subscription offers free shipping along with access to video content. This implies that streaming content is just positioned as one of the key features of the service to attract subscribers. Amazon offers other integrated product and services offerings through Prime membership such as Echo, Amazon’s Fire TV Stick, and Amazon Basic Cables.
While the revenues earned from the Prime service subscriptions account for a small chunk of the company’s total sales, the margins from Prime customers are much higher than other customers. Additionally, according to various reports, Prime customers tend to buy almost twice as much as the regular customers. We believe Prime subscribers will continue to grow rapidly as Amazon is investing heavily in streaming content to lure in more buyers.
The global e-commerce market is growing rapidly as consumers continue to shift to Internet for their purchases. Much of this is being driven by growing Internet penetration, increasing adoption of Internet enabled devices such as tablets, notebooks and smartphones, and the continuing improvement in online payment systems. The global online retail market was valued at roughly $1.9 trillion in 2015 and $2.3 trillion in 2016, and is expected to grow to over $4 trillion by the end of the decade.
Amazon is making significant investments to expand its presence in regions such as China, India, Italy and Spain. While these investments will enhance revenue growth, however, this strategy could also raise margin pressure. Amazon will invest a couple of billion dollars on its Indian operations, but since the country’s e-commerce market is highly competitive, we believe it will be difficult for Amazon to attain profitability in the region for at least a couple of years.
Microsoft's stock (NASDAQ:MSFT) has doubled since the beginning of 2018. Great news for Microsoft investors. Things haven't been too shabby for Amazon (NASDAQ:AMZN) investors either, as the company's stock also gained almost 60% during the same period... ...More
The Coronavirus pandemic is making people rely increasingly on the Internet to work, learn, shop, and entertain themselves as they spend more time at home. ...More
After an almost 25% rise in Amazon's (NASDAQ:AMZN) stock since the beginning of 2020, at the current price of around $2,400 per share, we believe Amazon’s stock offers limited upside potential once the market shakes off the impact of the coronavirus outbreak. Despite disruptions in its supply chains globally, Amazon has benefited over recent weeks as millions of people in the U.S. ...More
Amazon (NASDAQ:AMZN) stock took a big hit, falling by about 11.8% since March 8, (through March 12), as the broader S&P 500 fell by over 16.5%. The stock is down by a total of over 16.5% since early February. There were two broad trends driving the sell-off. ...More
Amazon (NASDAQ:AMZN) saw its stock price rise by almost 165% over the last three years, from $825 in February 2017 to about $2155 in February 2020. This rise was primarily driven by a significant jump in Revenues as well as Net Income Margin. The company’s stock gains were partly offset by a lower price-to-earnings (P/E) multiple and an increase in shares outstanding. ...More
Yes, as per Trefis Price estimate Amazon's (NASDAQ:AMZN) stock has a fair value of $2,218, which is roughly 10% higher than the current market price. Amazon is one of the world's largest online retailers and dabbles in a broad range of businesses, including its core e-commerce operations, cloud services, digital advertising, groceries, and prescription drugs. ...More
Amazon (NASDAQ:AMZN) is slated to release its Q4 and full-year 2019 results on January 30, 2020. We believe that Amazon's Revenues and earnings will beat consensus. We expect Amazon to report revenues of $279.3 billion (vs. consensus estimate of $279.1 billion), which would be 19.9% higher than the previous year. Earnings are likely to be around $22.67 (vs. ...More
While Amazon's (NASDAQ:AMZN) market cap has been hovering under the $1 trillion mark in recent months, the stock has seen significant volatility on account of mixed quarterly results. ...More
Amazon's (NASDAQ:AMZN) North America business, consisting primarily of retail sales in the region, is expected to contribute $177.6 billion to Amazon's 2019 revenues, making up 61.2% of Amazon's $290.4 billion in expected revenues for 2019. The North America segment contribution is more than twice that from International business. ...More
Amazon (NASDAQ:AMZN) makes money through its consumer ventures (online and offline retail sales, search advertising, content streaming etc) and cloud services (rental of compute, storage etc) and competes with industry leaders in the retail as well as technology industry including Walmart, Facebook, Google, Microsoft, IBM, eBay and Oracle. ...More
For the last 15 quarters, Amazon's retail revenue growth has averaged 26.3% versus eBay's 6.5% (on a year-on-year basis). However, the last four quarters have seen significant weakness with Amazon's retail revenue growth averaging 17.8% versus eBay's 2.6%. ...More
Per Trefis analysis, a merger of Amazon (NASDAQ:AMZN) and Oracle (NYSE:ORCL) could unlock significant value. While the idea may sound very ambitious, in order to keep itself at the top of the cloud technology food-chain, Oracle may be the best acquisition Amazon could ever make. ...More
Ride-hailing major Uber (NYSE:UBER) indicated that it wants to be the "Amazon of transportation," targeting a wide range of transportation services. In this analysis, we take a look at how Uber's financials and losses compared with Amazon's in its early years. ...More
Shopify - an e-commerce platform that allows businesses to create and run online stores - has seen its stock soar by close to 10x since its 2015 IPO. The company has two revenue streams - namely Subscriptions (which gives users access to its e-commerce platform and tools) and Merchant Services (wh... ...More
Amazon (NASDAQ:AMZN) is scheduled to report its Q2 on July 25. The company's Q1 had come ahead of consensus expectations on revenue (+17% y-o-y) and EPS (+$2.44 per share). ...More
Shopify (NYSE:SHOP) - an e-commerce platform that allows businesses to create and run online stores - has seen its stock soar by close to 10x since its 2015 IPO. ...More
Amazon's (NASDAQ:AMZN) advertising revenue growth over recent years, while logical, has come as a surprise to most. After all, Amazon is one of the world's largest retailers, and its retail business has been dominated by its e-commerce site, where GMVs have consistently risen. ...More
The U.S. advertising market has seen a marked shift in dynamics over the last decade due to the rise of digital advertising. In terms of component growth, non-digital revenues are expected to decline due to budget shifts towards digital. ...More
Google, Facebook, and Amazon are some of the largest and most successful companies in the tech world. In 2018, Google, Facebook and Amazon posted total revenues of $137 billion, $56 billion and $233 billion respectively. ...More
Amazon (NASDAQ:AMZN) reported its Q1 on April 25. The company beat consensus expectations on revenue (+17% y-o-y) and EPS (+$2.44 per share). Below are some highlights from the earnings announcement and call: Management's announcement of moving the two-day delivery to same day delivery for Prime members, leveraging Amazon’s 20 plus years of experience in logistics. ...More