Why I am invested in Amazon (WKN: 906866) - and why (maybe) soon no more.
My big Amazon analysis (Not investment advice):
Foreword:
I've been on getquin for 2 months now and logged in for about 1 month. Since then I have been able to read great and informative posts that have broadened my horizons and inspired me to both discussion and reflection. Now, of course, after only a month of "membership"(There really is now) I can not judge whether the lurid and logic-free content has increased, however, I had my silent readership from 2 months ago not yet the feeling to hang out partly in some subreddit. That has changed a lot, especially in the last 2-3 weeks.
But in order not only to prove a big mouth among the ultimately mentioned posts, I would like to introduce you to the company Amazon once (to the best of my knowledge) and thus offer a Mehrwehrt for all who are interested in the company and the share.
In addition, I was told on Instagram, I can only come this way to the awesome merch 🙈
Amazon should be in the depot especially with many stock market novices, among which I would also count myself by the way. The stock seems somehow Security whether this is a fallacy, however, we will hopefully find out in a moment.
My personal background with Amazon:(If you're bored by this, just skip it).
I have worked for the company both as a site security supervisor in a delivery station, as well as Site Manager of a fullfillment center.
I am familiar with internal processes, the real work-life balance, the corporate mission statement and much more. You could say I see myself as someone who knows what it looks like behind the glittering curtain.
I have seen sites come into being from the first stone to the last, experienced the training of future personnel and, in some cases, trained and instructed service providers from within my 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 there I would also be in a bad mood.
Even back when I started as a security service provider at Amazon, everything was innovative, modern and totally "futuristic" (today I think differently).
90% of my work took place on the latest computer with great systems and new software.
- fully automated people singling systems
- RFID chips with access authorizations
- From the cleaning staff to the station manager, I was on first-name terms.
- Managers strolled past me with their mobile workstations as if on a Sunday stroll.
- Chai latte drinking youngsters who had just finished their high school graduation, did their work and poked around with the fork in the delivered Chinese food, while 1 floor below the guest workers with their still 6-month valid non-EU driver's licenses freshened up for the end customers.
"This must be paradise...so not for all...but some just" I thought.
I was then asked after a short time whether I could imagine greater, because my good performance quickly found approval.
A little later I found myself in a Fullfillmentcenter(FC).
FC roughly broken down:
- a 120,000m² area with goods that go into the three-digit million range.
- Parking lots as big as soccer fields
- Hundreds to thousands(Q4) of employees
- No more chai latte and chill 😅
Why I quit my job at Amazon after Covid-19 I might tell in a separate post(If there is interest).
Amazon unintentionally taught me a lot and changed a lot in my life -. note my profile picture 😉
Now let's go!
What is Amazon?
Amazon is a globally active online mail order company with a wide range of products. According to its own information, Amazon, as the market leader of trade on the Internet, has 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 as part of online trading. 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. Through Amazon Web Services, the company is also one of the leading service providers for cloud computing.
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's shares?
75% of the shares are in free float.
Freely tradable shares of a company that are owned 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 U.S. financial services provider
5.7% of the shares are held by Blackrock
BlackRock Inc. is an internationally active U.S. 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:
AThat market capitalization is not everything becomes clear if we take the Chinese eCommerce giant as a comparison.
That the US market is not everything becomes clear if we take 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, Alibaba's revenue has been steadily increasing and reached a value of around 853 billion yuan (equivalent to around 134.6 billion U.S. dollars). Compared to the previous year revenue increased by about 19 percent.
Compared to the prior-year quarter, 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 hygiene products
- 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 allows Amazon customers to access additional services that are not available to regular customers or are subject to a fee.
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 can't find any currently confirmed numbers but due to the price increase the giant might have lost some customers.
Amazon had announced in July 2022 to increase the price of Amazon Prime in Germany by about 30 percent, whereupon I also terminated my subscription.
- 1.3.3 AWS (Amazon Web Services)
Cloud computing, what is it?
In principle there are 4 core areas in AWS which in turn offer much more content.
One can divide the following areas, which customers can buy:
- Provide storage space (pictures, videos, files or complete web presences)
- computing power
to provide (To run a web presence or web-based service) - Provide databases (To store information/data permanently or temporarily, both for offerings on the web and backups)
- Provide management tools (To track, manage and collaborate with others on all services, building blocks and projects)
Opening these areas now is beyond the scope, but you surely understand the possible applications behind them.
AWS has already supported some well-known companies that you may also have in your depot.
Netflix on AWS
Netflix is the world's leading Internet television network with more than 200 million members in more than 190 countries enjoying 125 million hours of television 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 collectively use 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 Coca-Cola's existing serverless architecture Amazon Web Services (AWS)
Volkswagen and AWS develop Industrial Cloud
Volkswagen and Amazon Web Services will jointly build the Volkswagen Industrial Cloud. The two companies announced a multi-year development collaboration for this purpose. In the future, the Volkswagen Industrial Cloud will bring together the data of all machines, plants and systems from all 122 factories of the Volkswagen Group.
Here are a few figures:
- In the year 2020, just under 45 billion U.S. dollars in sales.
- In the year 2021 around 62 billion US dollars Sales
- In the third quarter of 2022, sales of around $20.5 billion. Sales.
This makes Amazon the leader in the cloud computing market, and I'm eager to see the final 2022 report.
2.1 What other Amazon brands do I find interesting?
Twitch:
Twitch, also known as Twitch.tv, is a live streaming video portal used primarily for broadcasting video games and interacting with viewers via chat.
Twitch is the largest and most successful player in live streaming here.
- 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 do maybe also 🤷🏻
Zoox, Inc. is a subsidiary of Amazon that is developing autonomous vehicles to provide mobility-as-a-service.
- Amazon bought the company for $1.3 billion in June 2020
- Both robotaxi and autonomous delivery are expected to become possible
- The Zoox vehicle has already been driven without occupants, chasers or emergency brakes on open but private roads including road users such as pedestrians, cars, cyclists and trucks.
- The tests will now be extended to public roads.
Where is the journey headed?
After several years of testing, the robotaxi sector has begun to transition to commercialization in 2021 with an exponentially growing fleet of cars. This is thanks to rapidly falling hardware costs, better algorithms, better infrastructure, and loosening regulations.
Self-driving cars and trucks will sometime in the future be a normal part of the daily street scene. You can already see it in some parts of the world.
Zoox definitely has potential.
2.2 Business units at a glance
- onlinestores = 42 %
- third-party seller = 23 %
- AWS = 16 %
- advertising = 8
- subscriptions = 7
- offlinestores = 4 %
In the long term, I think that due to the high demand of AWS and the resulting profits, the focus of the business area will shift once again. AWS should grow significantly in the next 5 years and replace onlinestores at the top.
3.1 The interesting figures
Division | 2020 | 2021 | Performance
Sales | $ 368.1 billion | $ 469.8 billion | +21.7 %
EBIT | $51.5 billion | $66.3 billion | +8.7 %
Net income | $ 21.3 billion | $ 24.9 billion | + 56.8 %
Equity| $ 93.4 billion | $ 138.2 billion | + 48 %
Return on equity | 55,1 % | 48 % | - 7,1 %P
3.2 Other 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 does Amazon spend money on?
Research & development
Amazon has spent over in one year more than 60 billion USD on research & development. No other company has invested so much money in research & development.
People cause costs
In the area of HR (Human Resources), the giant incurs significant costs of over 8 billion USD. With 1.5 million employees worldwide, there is an immense level of fluctuation.
Amazon Alexa is not profitable
The device division of the sprawling corporation responsible for Alexa alone causes an operating loss of more than $5 billion every year.
4.1 Moat
Yes the giant recently got into a tailspin and we were all amazed that we had to record 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 hasn't happened for Amazon in ~15 years. Where one exits, opportunities arise for others.
Here is 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.
That's a huge - indeed, perhaps unfair - advantage, a so-called moat. Amazon needs to leverage that power (and, more importantly, AWS). We'll see if Amazon goes about it the right way.
4.2 Conclusion and why I will leave the company
All this doesn't read too bad at first - and it's not.
However, we do not invest only because of the great ACTUAL state but expect a great WEALTH state and thus also a fine return.
Which speaks for a purchase:
- Amazon is currently cheaper than it has been for a long time (this does not mean that Amazon is fundamentally cheap)
- Amazon has its fingers in many growth markets
- AWS
What 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
- The company is constantly criticized, which weakens growth.
Amazon is currently cheaper but still no pre-Christmas bargain.
I still took advantage of the recent drop in the share price, bought in to stay 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 my shares for a while, but I am squinting at other big tech companies that are also busy in the cloud. If Amazon ever decouples AWS for reasons I don't know and which are currently illogical and launches it on the market as its own stock, I would immediately sell my Amazon shares and reallocate them.
I hope you enjoyed my first analysis and can consider it an added value to the community.
Again - not investment advice. Bye 🙂
References:
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
