The original gangster of growth is Amazon

The original gangster of growth is Amazon, who replaced profits with vision and growth. However scant, though, Amazon did have positive gross margins. It eventually began registering a profit. In addition, Amazon was able to demonstrate a massive flywheel effect. The firm used their runway to find margin with AWS and Amazon Media Group.

Amazon seek to be Earth’s most customer-centric company. They are guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. In each of our segments, they serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators. In addition, they provide services, such as advertising to sellers, vendors, publishers, and authors, through programs such as sponsored ads, display, and video advertising.        

Amazon have organized our operations into three segments: North America, International, and Amazon Web Services (“AWS”).

GICS Sub-industry: Internet & Direct Marketing Retail

Market Cap: 1703.930 Bil.

TEV: 1750.418 Bil.

S&P Credit Rating: AA-

46% LT Debt/Cap

NAS

As one of the prominent players in the COVID-19 response, Amazon has had its share of good and bad press. Despite these and other challenges, Amazon continues to drive rapid growth across its portfolio, ranging from retail to cloud, devices and media. Customer centricity, supply chain capability and an innovation culture are at the core of its efforts and have led to a range of attention-grabbing capabilities. These vary widely including:

• Ever-faster, last-mile delivery capabilities, including next-day and same-day services, as well as the ownership of delivery with reports indicating that Amazon now delivers nearly half of its own packages, rather than relying on third-party providers.

• The hiring of 175,000 additional workers during the initial peak of the COVID-19 crisis to ensure customers continued to receive everyday necessity items and medical supplies.

• Scaling of the grocery-focused retail concepts including the new 10,400 square foot Amazon Go Grocery “just walk out” store in Seattle and microfulfillment capabilities.

A key area of opportunity remains — ESG, however. It is seeing increased emphasis within the business including stated goals to be net zero carbon by 2040 and reaching 100% renewable energy by 2030. Given Amazon’s innovative track record, as well as efforts already made in terms of a drive toward more sustainable packaging and the purchasing of 100,000 electric delivery vans from Rivian.

2020 SECOND QUARTER RESULTS

Financial Highlights

•Operating cash flow increased 42% to $51.2 billion for the trailing twelve months, compared with $36.0 billion for the trailing twelve months ended June 30, 2019.

•Free cash flow increased to $31.9 billion for the trailing twelve months, compared with $25.0 billion for the trailing twelve months ended June 30, 2019.

•Free cash flow less principal repayments of finance leases and financing obligations increased to $21.3 billion for the trailing twelve months, compared with $16.1 billion for the trailing twelve months ended June 30, 2019.

•Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations increased to $19.4 billion for the trailing twelve months, compared with $13.0 billion for the trailing twelve months ended June 30, 2019.

•Common shares outstanding plus shares underlying stock-based awards totaled 517 million on June 30, 2020, compared with 510 million one year ago.

•Net sales increased 40% to $88.9 billion in the second quarter, compared with $63.4 billion in second quarter 2019. Excluding the $582 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 41% compared with second quarter 2019.

•Operating income increased to $5.8 billion in the second quarter, compared with operating income of $3.1 billion in second quarter 2019.

•Net income increased to $5.2 billion in the second quarter, or $10.30 per diluted share, compared with net income of $2.6 billion, or $5.22 per diluted share, in second quarter 2019.

Third Quarter 2020 Guidance

•Net sales are expected to be between $87.0 billion and $93.0 billion, or to grow between 24% and 33% compared with third quarter 2019.

•Operating income is expected to be between $2.0 billion and $5.0 billion, compared with $3.2 billion in third quarter 2019.

Consumers

Amazon serve consumers through their online and physical stores and focus on selection, price, and convenience. They design their stores to enable hundreds of millions of unique products to be sold by us and by third parties across dozens of product categories. Customers access their offerings through their websites, mobile apps, Alexa, devices, streaming, and physically visiting their stores. Amazon also manufacture and sell electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, and other devices, and they develop and produce media content. They seek to offer their customers low prices, fast and free delivery, easy-to-use functionality, and timely customer service. In addition, Amazon offer Amazon Prime, a membership program that includes unlimited free shipping on over 100 million items, access to unlimited streaming of tens of thousands of movies and TV episodes, including Amazon Original content, and other benefits.

Competition

Their businesses encompass a large variety of product types, service offerings, and delivery channels. The worldwide marketplace in which they compete is evolving rapidly and intensely competitive, and they face a broad array of competitors from many different industry sectors around the world. Their current and potential competitors include:

(1) physical, e-commerce, and omnichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products;

(2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels;

(3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers;

(4) companies that provide e-commerce services, including website development and hosting, omnichannel sales, inventory, and supply chain management, advertising, fulfillment, customer service, and payment processing;

(5) companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline;

(6) companies that provide information technology services or products, including on-premises or cloud-based infrastructure and other services;

(7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices; and

(8) companies that sell grocery products online and in physical stores.

Seasonality

Their business is affected by seasonality, which historically has resulted in higher sales volume during their fourth quarter, which ends December 31. They recognized 34%, 31%, and 31% of their annual revenue during the fourth quarter of 2017, 2018, and 2019. Fourth quarter 2017 results include revenue attributable to Whole Foods Market, which they acquired on August 28, 2017.

Employees

Amazon employed approximately 798,000 full-time and part-time employees as of December 31, 2019. However, employment levels fluctuate due to seasonal factors affecting their business. They consider their employee relations to be good. Competition for qualified personnel has historically been intense, particularly for software engineers, computer scientists, and other technical staff.

Developers and Enterprises

Amazon serve developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through their AWS segment, which offers a broad set of global compute, storage, database, and other service offerings.

Insider Transactions  

1. 08/24/20Wilke Jeffrey A   CEO Worldwide Consumer

Open Market Sale

$3,304.28 - 750 - $2,478,209

1. 08/17/20Jassy Andrew R   CEO Amazon Web Services

Open Market Sale

$3,173.12 - 1,099 - $3,487,259

1. 08/17/20Olsavsky BrianT Senior Vice President and CFO

Open Market Sale

$3,173.12 - 1,377 - $4,369,386

1. 08/17/20Zapolsky David   Senior Vice President

Open Market Sale

$3,173.12 - 1,238 - $3,928,323

1. 08/17/20Reynolds Shelley   Vice President

Open Market Sale

$3,173.12 - 292 - $926,551

1. 08/04/20Bezos Jeffrey P   Chairman, CEO and President

Open Market Sale

$3,150.09 - 97,654 - $307,619,184

Disclaimer:

LUMIBASIS has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.