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Amazon Inc. Comprehensive Analysis: Specializing in Retail Sector Growth Challenges

Explore Amazon Inc.'s market performance, financial standing, and strategic moves in the specialty retail sector. Delve into factors impacting its valuation, profitability, and potential areas of concern.

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Amazon Inc. Comprehensive Analysis: Specializing in Retail Sector Growth Challenges

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  1. Comprehensive firm analysis Section 2 Specialty Retail Amazon Inc. Sophie Yu

  2. Introduction of amazon • Online retailer since July 1995 • Currently offers biggest selection on the earth • Also provided services • Advertising • Co-branded credit card agreements • Current Issues • Account Receivables • Tax reform • Consumer confidence is recovering, but there’s a limit • Moving into overseas (Europe case) • Freight cost increases • Huge R&D expenses • Construction in process and capital leases

  3. Expanded NEA

  4. Expanded NEA

  5. Expanded NFL

  6. EXPANDED EPAT

  7. Accounting adjustments • Operating leases • Stock-based compensation • (Details in Mod 11)

  8. WACC • β=0.903 • Cost of Equity:10.94% • Cost of Debt: 4.5% • WACC: 11.09% Market Value: $149,366

  9. VALUATION • DCF (only a part of the valuation model)

  10. VALUATION • REI

  11. VALUATION • AEG

  12. Why overvalued by market • Over-optimistic forecast of sales growth • Tax legislation • Competition from emerging online specialty retailers • Prime membership • Under estimated cost • R&D • Distribution centers and other buildings construction and leases • Over valued merger and acquisition • Slowed down in recent years • Size of mergers decreased • Business relationships and strategic alliances • Pricing limit • Current sales growth driven by reduction in price

  13. Profitability analysis • Amazon is actually not comparable to the other three companies in this industry

  14. Questions?

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