Amazon amzn On February 6th, the fourth quarter revenue report was released. This is Morningstar’s view on Amazon’s revenue and stocks.
Amazon’s Fair Value Estimates
With a 3-star rating, we believe that Amazon’s stock is valued significantly compared to its long-term fair value estimate of $240 per share. In the long run, we hope that e-commerce will take over sharing from brick and mortar retailers. Plus, we look forward to Amazon winning shares online. In the medium term, we believe that Covid has changed consumer behavior, penetrated several retail categories such as groceries, pharmacies and luxury goods, and previously did not gain much traction online.
I think the Prime subscription and the accompanying benefits (along with choice, price and convenience) continue to drive the retail story. We also view International as a long-term opportunity for retail. We model total retail-related revenues growing at a combined annual growth rate of 8% over the next five years.
Learn more about Amazon’s fair value estimates.
Economy Moat Rating
Assign a wide range of moat ratings to Amazon based on network benefits, cost benefits, intangible assets, and switching costs. Amazon has been disrupting the traditional retail industry for over 20 years, but has also emerged as a leading infrastructure provider as a service via Amazon Web Services. This disruption has been embraced by consumers, driving change across the industry as traditional retailers invest heavily in technology to keep pace. Covid-19 accelerated change and I think Amazon has expanded its lead given the company’s technical capabilities, its massive scale and its relationship with consumers. .
Read more about Amazon’s Economic Moat.
Financial strength
I think Amazon is financially healthy. Revenues are growing rapidly, margins are growing, the company has an unparalleled measure and its balance sheet is very shape. In our view, Prime continues to weave consumers firmly into Amazon, so the market remains attractive to third-party sellers. Additionally, AWS and advertising are driving overall growth for the company and continuing to expand margins.
As of December 31, 2024, Amazon has $100 billion in cash and marketable securities, offsetting its $52.6 billion in debt. It also expects that the production of free cash flow that it suffered during the pandemic will return to normal levels in the coming years as the company has made significant investments in its facility expansion, content creation and its transport network.
Read more about Amazon’s financial strength.
Risk and uncertainty
Amazon assigns media uncertainty ratings. The company has become challenging online, particularly as Covid-19 (as consumers could return to previous behavior), and traditional retailers strengthen their online presence. You need to protect your retail position. By maintaining the edge of e-commerce, we are now investing in non-traditional areas, such as creating Prime Video content and building our own transportation networks. Similarly, the company needs to maintain an attractive value proposition for third-party sellers. Some of these investment areas have raised investors questions in the past, and despite regular margin pressures due to increased spending, management expects to continue investing in accordance with their strategy .
Learn more about Amazon’s risks and uncertainties.
Amzn Bulls says
Amazon is a clear leader in e-commerce, continuing to invest in growth opportunities and enjoys unparalleled scale to drive the best customer experience. Amazon Prime membership helps you attract and retain customers who spend more on Amazon. This enhances the strong network effect while providing repetitive margin revenues.
Amzn Bears says
Regulatory concerns are rising for large technology companies, including Amazon. Furthermore, as businesses expand internationally, regulatory and compliance issues may increase. Also, Amazon’s penetration into some countries may be more difficult than in the US due to its inferior logistics network. Amazon may not have managed to penetrate new retail categories such as luxury goods due to consumer preferences and improved e-commerce experiences. Large retailer.
This article was edited by Gautami Thombare.
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