Instead of observing a downtrend, the shares of Amazon (NASDAQ: AMZN) continuously nudged higher during the pandemic, assisted by a rising topline and stable margins. Shifting trends toward online shopping and broader digital culture across the globe are key factors that have propelled Amazon’s growth even during uncertain times. On the flipside, the shares of Exxon Mobil (NYSE: XOM) were hammered by investors during the early phase of the pandemic and then rallied to historic levels as geopolitical tensions pumped oil prices higher. Currently, Amazon’s market capitalization is almost $740 billion more than Exxon Mobil with a $200 billion difference in topline. Can Amazon add two more Exxon Mobils to its market capitalization? On considering the historical growth figures and Amazon’s high capital expenditure to operating cash ratio, Amazon stock is poised for strong gains in the coming years. We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis, Exxon Mobil vs. Amazon: With Return Forecast Of 76%, Amazon Is A Better Bet.
- Revenue Growth
Amazon’s growth has been much stronger than Exxon Mobil in recent years, with Amazon’s revenues expanding at an average rate of 27% from $178 billion in 2017 to $470 billion in 2021. Exxon Mobil’s revenues observed a 4% average growth rate from $237 billion in 2017 to $276 billion in 2021. While Exxon Mobil’s top line declined by 30% (y-o-y) in 2021 due to the downward commodity cycle, Amazon registered steady growth even during the pandemic.
- Amazon’s three operating segments, North America, International, and AWS contribute 60%, 27%, and 13% of total revenues, respectively. Geographically, the United States accounts for 67% of the company’s total sales Interestingly, the company’s asset base is located within the broader corporate umbrella. Per recent filings, North America, International, AWS, and Corporate segments account for 38%, 14%, 15%, and 33% of total assets.
- Amazon envisages to become the most customer centric company in the world and thrives to serve its primary customer sets including consumers, sellers, developers, enterprises, content creators, advertisers, and employees.
- Exxon Mobil’s four operating segments, Upstream, Downstream, Chemical, Corporate & Other contribute 9%, 80%, 10%, and 1% of total revenues, respectively. However, the asset distribution is skewed toward the Upstream business which also generates a major chunk of earnings. The company’s Upstream, Downstream, Chemical, and Corporate & Other segments account for 65%, 18%, 11%, and 6% of total assets, respectively.
- While other oil majors including BP and Royal Dutch Shell focus on expanding their renewable energy and mobility solutions businesses, Exxon Mobil’s capital allocation plan focuses on its upstream portfolio. Thus, volatility in benchmark prices is the key risk faced by integrated and upstream oil & gas companies. (related: Is Occidental Petroleum Stock Worth The Risk?)
- Returns (Profits)
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Coming to returns, Exxon Mobil has consistently reported higher operating and net margins than Amazon – leading to higher cash generation and consistent dividend payouts.
- In 2021, Exxon Mobil reported $285 billion in total revenues and $48 billion of operating cash flow at an operating cash flow margin of 17%. Subsequently, the company invested $12 billion in property, plant & equipment, returned $15 billion as dividends to shareholders, and repaid $20 billion of long-term debt.
- In 2021, Amazon reported $470 billion in total revenues and $46 billion of operating cash flow at an operating cash flow margin of 10%. The company invested $58 billion in property, plant & equipment and raised $6.2 billion of long-term debt.
- Compensating shareholders by returning profits as dividends has been the key focus for Exxon Mobil whereas Amazon has been consistently re-investing in its business.
In 2021, Exxon Mobil and Amazon reported $43 billion and $116.3 billion of long-term debt, respectively. Given Exxon Mobil and Amazon’s $6.8 billion and $96 billion of cash & marketable securities, respectively, Amazon has significantly lower net debt as compared to Exxon Mobil.
- Higher financial leverage coupled with continued revenue growth is a boon for generating surplus equity returns. However, interest expenses weigh on finances as revenues decline – limiting dividend payouts and capital expenses.
- Trends in benchmark oil prices govern Exxon Mobil’s top and bottom line as the company’s upstream segment is the key earnings contributor. In 2020, XOM stock lost 50% of its value due to the deep dive in benchmark prices. However, pent-up demand and geopolitical tensions have inflated benchmark oil prices in recent times – leading XOM stock to the highs of $86.
- Per EIA, Brent benchmark is likely to trend lower toward $92/bbl in 2023 as ripple effects of the pandemic and Russia-Ukraine war subside. Thus, the company’s financials depend on broader macroeconomic trends, making it a riskier bet over Amazon. (related: Will Uncertain Times Last Longer For BP Stock?)
|S&P 500 Return||-3%||-16%||79%|
|Trefis Multi-Strategy Portfolio||-6%||-22%||208%|
 Month-to-date and year-to-date as of 5/11/2022
 Cumulative total returns since the end of 2016
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