Is Amazon Stock a Buy or Sell?
Amazon just had its best Prime Day in history. Is it a buy or sell? Let us dive into its fact, data and opinions.
Business Overview 📖
Amazon, founded in 1994 by Jeff Bezos, focuses on e-commerce with its own fulfillment network, cloud computing platform, and streaming services like Prime Video, Audible, and Twitch.
Amazon is competing in the E-commerce industry with competitors including Walmart and Etsy; Cloud Computing industry with competitors including Google and Microsoft; Digital Entertainment and Streaming industry with competitors like Netflix and Disney.
Management Highlight Quotes 📢
CEO Andy Jassy, “The pandemic and subsequent war in Ukraine have brought unusual growth and challenges”
AWS grows “34% annually over the last two years, and 37% year-over-year in the first quarter, AWS has been integral in helping companies weather the pandemic and move more of their workloads into the cloud”
“Consumer business has grown 23% annually over the past two years, with extraordinary growth in 2020 of 39% year-over-year that necessitated doubling the size of our fulfillment network that we’d built over Amazon’s first 25 years — and doing so in just 24 months.”
“We’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network. We know how to do this and have done it before. This may take some time, particularly as we work through ongoing inflationary and supply chain pressures
“Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.”
- Amazon had the biggest Prime Day 2022 with over 300M items sold.
- Amazon announced free Grubhub+ membership for US Prime members.
- Quarterly Revenue 116.44 Billion, Up 7% YoY
- Trailing 12 Months Revenue 477.75B, Up 14% YoY
- Next Quarter: Sales are expected to be between $116.0 billion and $121.0 billion, up between 3% and 7% compared. This guidance anticipates an unfavorable impact of approximately 200 basis points from foreign exchange rates. ☹️
- Gross Margin 43%
- Operating Margin 3%
- Net Margin -3% ☹️
- Next Quarter: Operating income (loss) is expected to be between $(1.0) billion and $3.0 billion, compared with $7.7 billion in the second quarter of 2021. ☹️
- Market Cap 1.13 Trillion
- P / S: 2
- P / E: 53 ☹️
Bull Say 👍
- AWS is the Cloud Computing industry leader with a 30%+ growth rate and impressive margin.
Bear Say 👎
- Amazon’s profitability continues deteriorating due to economic headwinds as the latest quarter's net margin is negative.
- Amazon’s valuation is too high for a company with 7% revenue growth. The current P/E ratio is 53 (vs Apple’s 24).
- Amazon’s growth rate in the future continues to slow. The average growth rate is only 5% next quarter.
By analyzing all the data, facts, and opinions, our model is bearish about Amazon.