My big Amazon analysis (Not investment advice):
The Foreword:
I've been on getquin for 2 months now and have been registered for about 1 month. Since then I have been able to read great and informative posts that have broadened my horizons and stimulated both discussion and reflection. Now, of course, after only one month of "membership" (they really do exist now) I can't judge whether the lurid and logic-free content has increased, but with my silent readership from 2 months ago I didn't have the feeling that I was hanging around in some subreddit. This has changed a lot, especially in the last 2-3 weeks.
However, in order to prove that I'm not just a big mouth among the ultimately mentioned posts, I would like to introduce the company Amazon to you (to the best of my ability) and thus offer added value for all those who are interested in the company and the stock.
I was also told on Instagram that this was the only way I could get my hands on the awesome merch 🙈
Amazon should be in the portfolio of many newcomers to the stock market, including myself, by the way. The share somehow seems security but we will hopefully find out in a moment whether this is a fallacy.
My personal background with Amazon:(If this bores you, just skip it)
I have worked for the company both as Site Security Supervisor in a delivery station, as well as site manager of a fulfillment center.
I am familiar with internal processes, the real work-life balance, the company mission statement and much more. You could say I see myself as someone who knows what it looks like behind the glamorous curtain.
I have seen sites develop from the first brick to the last, experienced the training of future staff and sometimes even trained and instructed service providers from our own ranks.
I didn't stand around stupidly at events, looking dangerously out from under a dark hood like stewards are doing right now at -1 degrees at the local Christmas markets - logo, I'd be in a bad mood too.
Even back then, when I started as a security service provider at Amazon, everything was innovative, modern and totally "futuristic" (I think differently today).
90% of my work was done on the latest computers with great systems and new software.
- Fully automated people separation systems
- RFID chips with access authorizations
- Everyone from the cleaner to the station manager is on first-name terms
- Managers strolled past me with their mobile workstations like on a Sunday stroll
- Youngsters drinking chai lattes, who had just finished their A-levels, did their work in a relaxed manner and poked around with their forks in the Chinese food that was delivered, completely stress-free, while one floor below the guest workers freshened up for the end customers with their non-EU driving licenses that were still valid for 6 months.
"This must be paradise...not for everyone...but for some" I thought.
After a short time, I was asked if I could imagine something bigger, because my good performance was quickly appreciated.
A little later I found myself in a fulfillment center (FC).
FC roughly broken down:
- a 120,000m² area with goods in the three-digit million range.
- Parking lots as big as soccer fields
- Hundreds to thousands(Q4) of employees
- No more chai lattes and chilling 😅
I might tell you why I quit my job at Amazon after Covid-19 in a separate post (if you're interested).
Amazon unintentionally taught me a lot and changed a lot in my life - please note my profile picture 😉
Now let's get going!
What is Amazon?
Amazon is a global online mail order company with a wide range of products. As the market leader in online retail, Amazon claims to have the world's largest selection of books, CDs and videos. Via the integrated sales platform Marketplace, private individuals or other companies can also offer new and used products for sale online. The Amazon Kindle reading device for electronic books, the Amazon Fire HD tablet computer, the Fire TV set-top box, the Fire TV Stick HDMI stick and the Echo voice recognition system are sold under the company's own brand. The company is also one of the leading service providers for cloud computing via Amazon Web Services.
1.1 Amazon facts
- Amazon has a market capitalization of 984.87 billion USD
- Over meanwhile 850 logistics locations worldwide
- at which over 1.5 million employees are employed
- Amazon is the second largest employer in the USA
- Since 2021
is no longer Jeff Bezos but Andy Jassy is the CEO
1.2 Who actually holds the company shares?
75% of the shares are in free float.
Freely tradable shares in a company that are held by many shareholders
12.7% of the shares are held by Jeff Bezos
CEO of Amazon until 2021.
6.6% of the shares are held by The Vanguard Group
The Vanguard Group is a US financial services provider
5.7% of the shares are held by Blackrock
BlackRock Inc. is an internationally active US investment company
1.3 How does Amazon earn its money?
- 1.3.1 eCommerce
Amazon's core business is eCommerce.
Amazon dominates the US market here, which is clearly one of the most important sales markets.
- With 49%, Amazon is the absolute leader here.
- Ebay, Walmart, Homedepot, Bestbuy, Costco and others share the rest
BUT:
A comparison with the Chinese e-commerce giants shows that market capitalization is not everything.
That the US market is not everything becomes clear when we look at the Chinese eCommerce giant as a comparison.
With a market capitalization of USD 229.70 billion, Alibaba is far behind Amazon with its USD 984.87 billion
However, Alibaba dominates the entire Asian market and its turnover has risen steadily, reaching a value of around 853 billion yuan (the equivalent of around 134.6 billion US dollars). Compared to the previous year sales increased by around 19 percent.
Compared to the same quarter of the previous year, Amazon's sales increased by around 15 percent from around 110.8 billion US dollars to 127.1 billion US dollars
increased. The company generated its highest quarterly revenue to date in the fourth quarter of 2021.
Descending best-selling items from Amazon:
- Electronics
- Clothing, shoes and accessories(I had to google that word 😅)
- Household and kitchen appliances
- Cosmetics and toiletries
- books
- Telephones/smartphones
- TV sets and accessories
- Movies and content via Prime streaming
- Pet supplies
- 1.3.2 Amazon Prime members
Amazon Prime is an optional paid subscription offered by Amazon that gives Amazon customers access to additional services that are not available to regular customers or are subject to a charge.
These include, for example, special shipping services or the video streaming service.
As of 2021 Q1, Amazon had 200 million paying Prime customers, unfortunately I cannot find any currently confirmed figures, but the price increase is likely to have caused the giant to lose some customers.
Amazon announced in July 2022 that it would be increasing the price of Amazon Prime in Germany by around 30 percent, after which I also canceled my subscription.
- 1.3.3 AWS (Amazon Web Services)
What is cloud computing?
In principle, there are 4 core areas in AWS which in turn offer a lot more content.
The following areas can be divided into which customers can buy:
- Provide storage space (images, videos, files or complete websites)
- computing power
make available (To operate a web presence or a web-based service) - Provide databases (To store information/data permanently or temporarily, both for web offerings and backups)
- Provide management tools (to track, manage and collaborate with others on all services, building blocks and projects)
To open up these areas now would go beyond the scope, but you certainly understand the possible applications behind them.
AWS has already supported some well-known companies that you may also have in your portfolio.
Netflix on AWS
Netflix is the world's leading Internet television network with more than 200 million members in more than 190 countries who enjoy 125 million hours of TV shows and movies every day. Netflix uses AWS for nearly all of its compute and storage needs, including databases, analytics, recommendation engines, video encoding, and more than a hundred functions that use a total of more than 100,000 server instances on AWS.
Coca Cola
with AWS
As the COVID-19 pandemic continues to change the world and consumer behavior shifts, The Coca-Cola Company has developed a new pouring option to meet consumer needs via smartphone with its latest technology innovation, Coca Cola Freestyle - contactless mobile pouring. This is based on the existing serverless architecture of Coca-Cola Amazon Web Services (AWS)
Volkswagen and AWS develop Industrial Cloud
Volkswagen and Amazon Web Services will jointly develop the Volkswagen Industrial Cloud. The two companies have announced a multi-year development collaboration. In future, the Volkswagen Industrial Cloud will bring together data from all machines, plants and systems from all 122 Volkswagen Group factories.
Here are a few figures:
- In the year 2020 almost 45 billion US dollars turnover.
- In the year 2021 around 62 billion US dollars turnover
- In the third quarter of 2022 around 20.5 billion US dollars Turnover.
This makes Amazon the leading provider in the cloud computing market and I am looking forward to the final report in 2022.
2.1 What other Amazon brands do I find interesting?
Twitch:
Twitch, also known as Twitch.tv, is a live streaming video portal that is primarily used to broadcast video games and interact with viewers in chat.
Twitch is the largest and most successful player in live streaming.
- 69% of the total hours that users watched live content on all platforms were watched on Twitch from 2021 Q1 to 2022 Q2.
- Most of the money is made here with advertising revenue generated.
Zoox: what Tesla can do, Amazon can perhaps also 🤷🏻
Zoox, Inc. is an Amazon subsidiary that develops autonomous vehicles to offer mobility-as-a-service.
- Amazon bought the company in June 2020 for USD 1.3 billion
- Both robotaxi and autonomous delivery are to become possible
- The Zoox vehicle has already driven on open but private roads, including road users such as pedestrians, cars, cyclists and trucks, without occupants, chasers or emergency brakes.
- The tests are now to be extended to public roads.
Where will the journey take us?
After several years of testing, the robotaxi sector has started to move towards commercialization in 2021 with an exponentially growing fleet of cars. This is thanks to rapidly decreasing hardware costs, better algorithms, better infrastructure and easing regulations.
Self-driving cars and trucks will at some point in the future be a normal part of the everyday street scene. You can already see it in some parts of the world.
Zoox definitely has potential.
2.2 Business areas at a glance
- onlinestores = 42 %
- third-party seller = 23 %
- AWS = 16 %
- advertising = 8 %
- subscriptions = 7 %
- offlinestores = 4 %
In the long term, I think that the high demand for AWS and the resulting profits will shift the focus of the business area once again. AWS is likely to grow significantly over the next 5 years and replace onlinestores at the top.
3.1 The interesting figures
Division | 2020 | 2021 | Performance
Turnover | 368.1 billion $ | 469.8 billion $ | +21.7 %
EBIT | 51.5 bn $ | 66.3 bn $ | +8.7 %
Profit | 21.3 bn $ | 24.9 bn $ | + 56.8 %
Shareholders' equity| 93.4 bn $ | 138.2 bn $ | + 48 %
Return on equity | 55,1 % | 48 % | - 7,1 %P
3.2 Further fundamental key figures
2021
Valuation ratios are notoriously debatable, but here are a few at a glance.
Earnings per share in EUR |3.13 -> Definitely in the red in 2022
P/E RATIO |51.45 -> Forecast 2022 lower
Earnings growth (%) |+54.94 -> Forecast 2022 lower
PEG |-0.50 -> Forecast 2022 higher
Cash flow per share in EUR | 88.32 -> Forecast 2022 lower
Sales in USD | 469.82 billion -> forecast 2022 lower
Sales growth (%) | +21.70 % -> Forecast 2022 lower
Based on the figures, it can be said that the development is currently somewhat difficult to assess. 2022 is definitely not a good financial year for Amazon.
3.3 What is Amazon spending money on?
Research & development
Amazon has spent more than 60 billion USD on research & development in one year. No other company has invested so much money in research and development.
People cause costs
In the area of HR (human resources), the giant incurs considerable costs of over USD 8 billion. With 1.5 million employees worldwide, there is an immense level of fluctuation.
Amazon Alexa is not profitable
The device division alone, which is responsible for Alexa, causes an operating loss of more than USD 5 billion every year.
4.1 Moat
Yes, the giant recently started to stagger and we were all amazed to see that we were down over 20%.
The earnings call in October disappointed many investors, although I think that was to be expected.
The share price is 50% below the all-time high, which has not been the case for Amazon for ~15 years. Where one person exits, opportunities arise for others.
Here's why:
- Amazon has existing customers through Prime membership, making it much easier to launch services like Amazon Prime Video and Amazon Music.
- If Amazon enters the healthcare industry, it already has a large logistics and retail network.
- If Amazon enters the gaming market, it already has customer access through the gaming streaming platform Twitch.
This is an enormous - and perhaps unfair - advantage, a so-called moat. Amazon must use this power (and AWS in particular). We'll see if Amazon goes about it the right way.
4.2 Conclusion and why I will be leaving
That doesn't sound so bad at first - and it's not.
However, we are not only investing because of the great ACTUAL state, but also because we expect a great REAL state and thus also a fine return.
Which speaks in favor of a purchase:
- Amazon is currently cheaper than it has been for a long time (this does not mean that Amazon is generally cheap)
- Amazon has its fingers in many growth markets
- AWS
Which speaks against a purchase:
- Amazon invests a lot of money in research & development, which is basically good but reduces margins and burns money
- Other companies are catching up significantly in the cloud business
- Is constantly criticized as a company, which weakens growth.
Amazon is currently cheaper but still not a pre-Christmas bargain.
Nevertheless, I took advantage of the recent fall in the share price, bought in to remain invested for the long term and will now hold my shares. I find AWS and the cloud very exciting. I still believe that Amazon can and will continue to grow, but I am slowly becoming more skeptical.
I will hold on to my shares for a while, but I am looking at other big tech companies that are also busy in the cloud. If Amazon were ever to spin off AWS and bring it to the market as a separate stock for reasons I don't know and which are currently illogical, I would sell my Amazon shares immediately and switch.
I hope you enjoyed my first analysis and that you can see it as added value in the community.
Once again - no investment advice. Bye 🙂
Sources:
1.1 Sources:
https://www.aboutamazon.de/news/ueber-amazon/was-ist-amazon
1.2 Sources:
https://stock3.com/aktien/amazoncom-119109
1.3 Sources:
1.3.3 Sources:
https://aws.amazon.com/de/solutions/case-studies/coca-cola-freestyle/
2.1 Sources:
https://streamhatchet.com/reports/
https://www.wiwo.de/unternehmen/dienstleister/zoox-so-sieht-amazons-robotaxi-aus/26719244.html
3.1 Sources:
Annual reports year 2020 & 2021
3.2 Sources:
https://www.onvista.de/aktien/kennzahlen/Amazon-Aktie-US0231351067?referrer=https%3A%2F%2Fwww.google
3.3 Sources:
Annual reports year 2020 & 2021
