Amazon.com, Inc. (AMZN): The Trailblazer at the Head of the Online Retail Revolution

Page 1 of 2

The global leader in the online retail industry, Amazon.com, Inc. (NASDAQ:AMZN) has only risen 7.31% so far in 2013, not even half of the return provided by the Dow Jones Industrial Average so far this year.

Amazon.com, Inc. (NASDAQ:AMZN)

Amazon.com, Inc. (NASDAQ:AMZN) is a leading online retailer offering a broad array of items, with a prominent presence both domestically and internationally. Based on market capitalization, Amazon is valued at $122.55 billion. However, the profitability of the company’s business model has been brought into question, as the TTM profit margin is currently -0.14%.

With the stock trading within $15 of all time highs, at current prices is Amazon.com, Inc. (NASDAQ:AMZN) a solid investment in the world of tomorrow, or should investors wait for a more reasonable valuation to be stapled to this innovative giant?

Strengths:

Institutional Vote of Confidence:
67% of shares outstanding are held by institutional investors, representing over $80 billion in investment, displaying the confidence some of largest investors in the world have in the company and its future.

Explosive Revenue Growth:

In 2003 Amazon reported revenue of $5.26 billion; in 2012, the company announced revenue of $61.09 billion, representing year over year annual growth of 31.32%, an explosive trend which is anticipated to sustain into the future, with projections placing 2017 revenue at $162.69 billion.  This growth has been a result of the rapid adoption of the Amazon.com, Inc. (NASDAQ:AMZN) platform and the growing popularity of online retail both internationally and in the US.

Leading Market Position:
Amazon is the leader in the online retail industry both domestically and internationally, possessing top market share positions, and with this comes a greater level of dominance and control over its industry.

Brand Value & Loyalty:

Amazon’s brand value is estimated to be $28.66 billion, and the level of brand loyalty most customers display is
valuable.

Innovative Business Model:

The company possesses virtually unlimited online shelf space, and can offer customers a vast and diverse selection of products through an effective search and retrieval interface, and the shopping experience is personalized by Amazon recommending products based on past purchases and a wide array of reviews that are offered on the site, giving the company a distinct advantage over traditional brick and mortar retail stores.

Free Cash Flow: In 2013, Amazon.com, Inc. (NASDAQ:AMZN) is projected to generate $4.9 billion in free cash flow, representing the financial strength and security the company possesses.

Net Cash Position: Amazon’s $10 billion debt load is outweighed by its $11 billion position of cash and cash equivalents, resulting in a net cash position of $1.1 billion, or $2.40 per share, a minor financial strength of the company.

Weaknesses:

Lack of Dividend:
At no time in the company’s history has Amazon paid out a dividend, and the company has expressed no plans of doing so in the future, a major downside for long-term investors.

High Valuation: At the moment, Amazon carries a price to book ratio of 14.53, a price to sales ratio of 2.01, and a price to earnings ratio that is currently negative, all of which indicate a company trading with an extremely high valuation.

Opportunities:

Continuation of Shift to Online Retail Platforms: In 2011, only roughly 7% of total US retail sales were estimated to be e-commerce transactions, totaling $202 billion; however, Forrester Research projects this figure rising to 9% by 2016, totaling $327 billion. Internationally, as of the end of 2011, the use of the Internet as a purchasing tool only possessed a penetration rate of 33%, compared to the 78% penetration rate in the United States, demonstrating incredible potential for e-commerce platforms.

Increase in Market Share:
Amazon.com, Inc. (NASDAQ:AMZN)’s market share of both the international and United States online retail markets has increased substantially over the past years, and is anticipated to continue to gain ground into the future, presenting opportunity for the company to fuel revenue growth.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!