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Category: Stock Market and Amazon (AMZN)
Date: 3 February 2021 Stock Price of Amazon (AMZN): $3380 We take a look at the 4th quarter earnings release of their 2020 fiscal year of the world's biggest online retailer and one of the biggest companies in the world in terms of market capital Amazon. The group reported sales of $125.5 billion and net income of $7.2 billion for the 4th quarter of their 2020 fiscal year.
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Amazon is also announcing today that Jeff Bezos will transition to the role of Executive Chair in the third quarter of 2021 and Andy Jassy will become Chief Executive Officer at that time. Amazon is what it is because of invention. We do crazy things together and then make them normal."
About Amazon Inc (AMZN)
Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon.
Amazon is currently one of the worlds largest companies in terms of market capital. And it forms part of the famed "FAANG" stocks. FAANG is an acronym for Facebook, Amazon, Apple, Netflix and Google.
Amazon is currently one of the worlds largest companies in terms of market capital. And it forms part of the famed "FAANG" stocks. FAANG is an acronym for Facebook, Amazon, Apple, Netflix and Google.
Overview of Amazon's 4th quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
Segmental information regarding Amazon for their 4Q 2020:
- Net sales: $125.5 billion (up from $87.4 billion from the same quarter of the previous year)
- Net sales increased by 43.6% over the last 12 months
- Operating expenses: $118.6 billion (up from $83.6 billion for the same quarter of the previous year)
- Operating expenses increased by 41.8% over the last 12 months
- Some margin gains for Amazon as net sales increased at a faster rate than their cost and expenses
- Net income: $7.22 billion (up from $3.26 billion for the same quarter of the previous year)
- Diluted earnings per share: $14.09 (up from $6.47 for the same quarter of the previous year)
- PE ratio of Amazon: 88.8 (this compared to the PE of the SP 500 around 25)
- Diluted weighted-average shares outstanding: 515 million (up from 505 million for the same quarter of the previous year)
- Cash and cash equivalents: $2.1 billion
- Cash and cash equivalents per share: $81.7
- Cash and cash equivalents makes up 2.4% of Amazon's market capital
- Cash and cash equivalents makes up 13.1% of Amazon's total assets
- Inventories: $23.8 billion
- Inventories makes up 7.4% of Amazon's total assets
- Accounts receivable: $24.5 billion
- Accounts receivable makes up 7.6% of Amazon's total assets
- Stockholders equity of Amazon: $93.4 billion
- Stockholders equity per share: $181.4
- Amazon is trading at 18.6 times its stockholders equity which is well outside the expected range of between 2 and 6 which most companies tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 4.2 times.
- Cash generated from operations: $30.4 billion
- Cash generated from operations per share: $59
Segmental information regarding Amazon for their 4Q 2020:
- Net sales: North America: $75.3 billion
- Net sales : International: $37.5 billion
- Net sales: Amazon Web Services (AWS) : $12.7 billion
Amazon's management commentary on their 4th quarter 2020 earnings
SEATTLE—(BUSINESS WIRE) February 2, 2021—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its fourth quarter ended December 31, 2020.
Fourth Quarter 2020
Amazon is also announcing today that Jeff Bezos will transition to the role of Executive Chair in the third quarter of 2021 and Andy Jassy will become Chief Executive Officer at that time. “Amazon is what it is because of invention. We do crazy things together and then make them normal. We pioneered customer reviews, 1-Click, personalized recommendations, Prime’s insanely-fast shipping, Just Walk Out shopping, the Climate Pledge, Kindle, Alexa, marketplace, infrastructure cloud computing, Career Choice, and much more,” said Jeff Bezos, Amazon founder and CEO. “If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention. Right now I see Amazon at its most inventive ever, making it an optimal time for this transition.”
- Operating cash flow increased 72% to $66.1 billion for the trailing twelve months, compared with $38.5 billion for the trailing twelve months ended December 31, 2019.
- Free cash flow increased to $31.0 billion for the trailing twelve months, compared with $25.8 billion for the trailing twelve months ended December 31, 2019.
- Free cash flow less principal repayments of finance leases and financing obligations increased to $20.3 billion for the trailing twelve months, compared with $16.2 billion for the trailing twelve months ended December 31, 2019.
- Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations increased to $21.4 billion for the trailing twelve months, compared with $12.5 billion for the trailing twelve months ended December 31, 2019.
- Common shares outstanding plus shares underlying stock-based awards totaled 518 million on December 31, 2020, compared with 512 million one year ago.
Fourth Quarter 2020
- Net sales increased 44% to $125.6 billion in the fourth quarter, compared with $87.4 billion in fourth quarter 2019. Excluding the $1.7 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 42% compared with fourth quarter 2019.
- Operating income increased to $6.9 billion in the fourth quarter, compared with operating income of $3.9 billion in fourth quarter 2019.
- Net income increased to $7.2 billion in the fourth quarter, or $14.09 per diluted share, compared with net income of $3.3 billion, or $6.47 per diluted share, in fourth quarter 2019.
Amazon is also announcing today that Jeff Bezos will transition to the role of Executive Chair in the third quarter of 2021 and Andy Jassy will become Chief Executive Officer at that time. “Amazon is what it is because of invention. We do crazy things together and then make them normal. We pioneered customer reviews, 1-Click, personalized recommendations, Prime’s insanely-fast shipping, Just Walk Out shopping, the Climate Pledge, Kindle, Alexa, marketplace, infrastructure cloud computing, Career Choice, and much more,” said Jeff Bezos, Amazon founder and CEO. “If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention. Right now I see Amazon at its most inventive ever, making it an optimal time for this transition.”
Fiscal Guidance Of Amazon
The following forward-looking statements reflect Amazon.com’s expectations as of February 2, 2021, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, and the various factors detailed below. This guidance reflects our estimates as of February 2, 2021 regarding the impact of the COVID-19 pandemic on our operations, including those discussed above, and is highly dependent on numerous factors that we may not be able to predict or control, including: the duration and scope of the pandemic, including any recurrence; actions taken by governments, businesses, and individuals in response to the pandemic; the impact of the pandemic on global and regional economies and economic activity, workforce staffing and productivity, and our significant and continuing spending on employee safety measures; our ability to continue operations in affected areas; and consumer demand and spending patterns, as well as the effects on suppliers, creditors, and third-party sellers, all of which are uncertain. This guidance also assumes the impacts on consumer demand and spending patterns, including impacts due to concerns over the current economic outlook, will be in line with those experienced during the first quarter of 2021 to date, and the additional assumptions set forth below. However, it is not possible to determine the ultimate impact on our operations for the first quarter of 2021, or whether other currently unanticipated direct or indirect consequences of the pandemic are reasonably likely to materially affect our operations.
First Quarter 2021 Guidance
The following forward-looking statements reflect Amazon.com’s expectations as of February 2, 2021, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, and the various factors detailed below. This guidance reflects our estimates as of February 2, 2021 regarding the impact of the COVID-19 pandemic on our operations, including those discussed above, and is highly dependent on numerous factors that we may not be able to predict or control, including: the duration and scope of the pandemic, including any recurrence; actions taken by governments, businesses, and individuals in response to the pandemic; the impact of the pandemic on global and regional economies and economic activity, workforce staffing and productivity, and our significant and continuing spending on employee safety measures; our ability to continue operations in affected areas; and consumer demand and spending patterns, as well as the effects on suppliers, creditors, and third-party sellers, all of which are uncertain. This guidance also assumes the impacts on consumer demand and spending patterns, including impacts due to concerns over the current economic outlook, will be in line with those experienced during the first quarter of 2021 to date, and the additional assumptions set forth below. However, it is not possible to determine the ultimate impact on our operations for the first quarter of 2021, or whether other currently unanticipated direct or indirect consequences of the pandemic are reasonably likely to materially affect our operations.
First Quarter 2021 Guidance
- Net sales are expected to be between $100.0 billion and $106.0 billion, or to grow between 33% and 40% compared with first quarter 2020. This guidance anticipates a favorable impact of approximately 300 basis points from foreign exchange rates.
- Operating income is expected to be between $3.0 billion and $6.5 billion, compared with $4.0 billion in first quarter 2020. This guidance assumes approximately $2.0 billion of costs related to COVID-19.
- This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.
Amazon (NASDAQ: AMZN) stock price chart over the last 5 years
The image below shows the stock price history of Amazon (NASDAQ: AMZN) over the last 5 years. And it's been a amazing time for Amazon (NASDAQ: AMZN). Over the last 5 years the stock of Amazon has increased by 511.7% over the last 5 years. Thats returns NO investor would say no to
The stock of Amazon is trading at a closer to its 52 week high than it is to its 52 week low which is a clear indication that the short sentiment and momentum of Amazon is very positive.
The stock of Amazon is trading at a closer to its 52 week high than it is to its 52 week low which is a clear indication that the short sentiment and momentum of Amazon is very positive.
Amazon (AMZN) stock vs Walmart (WMT) stock over the last 5 years
The image below shows the stock price performance of Amazon (AMZN) and Walmart (WMT) over the last 5 years. One a massive bricks and mortar retail shopping chain, the other the world's largest online retailers. The image shows that the stock price trends looks fairly similar, but thats due to the fact that the scaling of the two charts are totally different. Below the stock price returns provided by Amazon and Walmart over the last 5 years:
The online retailer Amazon has easily outperformed the bricks and mortar retailers, Walmart over the last 5 years
- Amazon: 511.7%
- Walmart: 112.2%
The online retailer Amazon has easily outperformed the bricks and mortar retailers, Walmart over the last 5 years
Amazon (NASDAQ:AMZN) latest stock valuation
So based on the 2nd quarter 2020 earnings report of Amazon (NASDAQ: AMZN) what do we value Amazon (AMZN) stock at? Based on their latest earnings report our valuation models provide a target price (full value price) for Amazon stock at $1940.10 a stock (up from our 3rd quarter 2020 earnings valuation of Amazon). We therefore believe the stock of Amazon is overvalued.
We usually advise investors to look to enter a stock at least 10% below our target price (full value price) which in this case is $1940.10. So a good entry point into Amazon would be around $1746
We expect the stock price of Amazon to pull back to levels closer to our target price (full value price) in coming weeks and months and since its trading at well above our suggested target price or entry price we rate the stock of Amazon as a SELL
We usually advise investors to look to enter a stock at least 10% below our target price (full value price) which in this case is $1940.10. So a good entry point into Amazon would be around $1746
We expect the stock price of Amazon to pull back to levels closer to our target price (full value price) in coming weeks and months and since its trading at well above our suggested target price or entry price we rate the stock of Amazon as a SELL
Next earnings release of Amazon (AMZN)
It is expected that Amazon (AMZN) will release their 1st quarter 2021 earnings report in late April 2021