Amazon Corp. - Stocks

Instrument description

Amazon is the world’s largest e-commerce marketplace, as measured by its total market capitalization. Amazon is an American multinational technology giant that is located in the wonderful city of Seattle, Washington. In the business world, the ‘FAANG’ acronym is valued the most and comprise of prominent companies of America, which includes ‘Facebook, Amazon, Apple, Netflix, Google.’ FAANF denotes to the best business companies with blue-chip stocks that have combined market capitalization of $4.1 trillion.

Amazon has truly emerged as a major business force in the B2C (business to consumer) sector. Digital technology has advanced rapidly, which has boosted Amazon’s online retail business. The company offers more than 120 million products for online sales and has an estimated 150 million active consumers only in the USA. The large market capitalization of Amazon is due to its net income of $11 billion and additional TTM (Trailing Twelve Months) revenues of $265 billion.

Amazon has become a global brand, and its stock value grew enormously, and in the past five years, the stock value of Amazon grew 500%. Amazon is included in the prestigious NASDAQ-100 Index, the S&P-100 Index, and the S&P-500 Index.

Amazon marked its 25th anniversary on July 5, 2019. The company has its head office in Seattle, Washington, but global offices are located in more than 30 countries in the world. The total number of employees is estimated to be 798,000. The CEO and president of Amazon, Jeff Bezos, has been the richest man of the world since 2017 and has a net worth of $178.2 billion as of 2020. Amazon accounts for nearly 50% of online retail in the US alone and also occupies 288.4 million square feet of real estate. Amazon also owns and runs warehouses, distribution centers, and airplanes.

History of Amazon

Amazon was founded by Jeff Bezos first as an online bookstore in July 1994. The parents of Jeff Bezos invested in $250,000 in the startup, and just in a few months, the business generated $20,000 a week. In 1998, the business started the music and video sales, and in the same year, Amazon started the global business by acquiring online booksellers in the UK and Germany. In 1999, Amazon’s business had expanded, and it was not only dealing with books but offered consumer electronics, toys and games, software, video games, and household goods.

Amazon went public and started trading on the NASDAQ on May 15, 1997. The initial stock value was priced at $18 per share, and the market valuation was $300 million. But then Amazon has three stock splits, once in 1998 and twice in 1999. Right after its Initial Public Offering (IPO), the share price surged despite the economic troubles due to the ‘dot-com crash.’ In the decade from 2000 to 2010, Amazon saw many fluctuations, but despite significant growth its share price in the economic recession was below $80, but ten years later, it traded over $2000.

Amazon has acquired dozens of business companies and startups to expand its business and diversify its portfolio. Some of the notable subsidiaries of Amazon include Whole Foods Market Inc., Twitch.Tv, IMDB, Ring (for $1.8 billion), PillPack (for $1 billion), Zappos (for $1.2 billion), and Kiva Systems (for $775 million). The most important acquisition of Amazon remains Whole Food Market, which was done in 2017 and valued at $13.7 billion.

In September 2018, Amazon became the second company after Apple to touch $1 trillion in market capitalization and also did it one month after Apple reached the milestone.

Current Business and Investment of Amazon

Amazon first began as an online bookstore in the early 1990s, but today is the biggest and most valued tech company in the world. Today, the core business of the company remains e-commerce, but it also operates cloud computing services, artificial intelligence, digital streaming, and manufactures a range of electronic devices such as Kindle Readers, Fire Tablet, Fire TV, and Echo devices.

Amazon offers millions of different products and services through its online retail business. Amazon has three divisions that include Amazon Marketplace, Amazon Prime, and Amazon Web Services. The company offers products, merchandise, and content that it purchases from vendors and other third-party sellers. Amazon also makes and sells electronic gadgets such as smartphones and tablets.

Amazon has been a pioneer in the sector of e-commerce, which is why the company has been miles ahead than any other company in the online retail business. The company has evolved and took full advantage of the digital transformation. Amazon has become a company that sells anything and everything, such as electronic devices, food, clothes, fashion accessories, books, furniture, software, video games, and household items.

Amazon also owns and runs Whole Foods Market Inc. that offers a wide assortment of organic and healthy food products that includes organic avocados, bananas, organic farmed salmon, organic large brown eggs, organic baby lettuce, crunchy almond, and rotisserie chicken.

Over the years, the main factor of Amazon’s success has mostly come from Amazon’s Web Services products along with

• Valuable acquisitions in wide segments of the market, such as grocery (Whole Foods Market), pharmaceutical (PillPack), and clothing (Zappos).
• Extensive research and development in advanced technology such as Artificial Intelligence (A.I) and Facial Recognition. Alexa is the growing success of A.I implementation of Amazon.
• Use of cloud computing services to diversify its products and services back in 2006. But it took a while for the cloud computing to show its potential and now it accounts for most of the company’s revenue. Amazon Prime is the fastest growing platform for online games, music, videos, and movies.
• Expanding its client and customer base by including large corporate businesses and even government-run companies.

Amazon has over 310 million active users and 100 million subscribers. Amazon operates in more than 185 countries of the world. The company has 14 international websites that allow consumers to order a thing or two.

Risk and Potential in Amazon Business Environment

Amazon is a global brand with widespread popularity as the best online retailer. The SWOT analysis is a valuable analysis tool that allows us to study the dynamics of a company. Amazon is a leading I.T and Technology company with a staggering amount of yearly revenue and investments in numerous segments of the market. Amazon is positioned as an online retail marketplace that can be used by people of every age to enhance their online shopping experience. The SWOT analysis of Amazon are

• Strengths

A prominent and trusted brand name that is popular in the entire world. Amazon is a $1 trillion company that shows its value and potential. The company has a wide array of consumer products and services and a huge customer base in the international markets. Amazon offers a customized shopping experience with easy online payment methods. Third-party sellers can easily join and sell their merchandise. Amazon has made many wise and calculated acquisitions such as Whole Food, Zappos, PillPack, and IMDB.

• Weaknesses

The online retail business is fast becoming saturated with nearly every consumer-based company offering an online shopping experience. Amazon faces tough challenges from other international e-commerce brands. Free shipping in some countries is not cost-effective and leads to financial losses. The dive into manufacturing electronic gadgets such as Fire Phone and Kindle Readers was not as successful as predicted. The company heavily relies on certain selected distributors for the delivery of products to customers.

• Opportunities

Amazon has a golden opportunity to further expand its business by venturing into emerging markets of Asia and Africa. The company can take help from technology to prevent counterfeit sales. Amazon can acquire smaller firms to expand their growth.

• Threats

The major challenge that Amazon faces it from its rivals that includes eBay, Alibaba, Walmart, Tesco, Costco Wholesale, Barnes & Noble, Netflix, and Hulu. Stringent government regulations and taxations can impact the business. The fraud in online transactions is another cause of concern for the company. Economic recession also causes a decline in sales.

Stock Analysis of Amazon

Amazon is listed and actively trades on the NASDAQ with the ticker symbol AMZN. The company is listed under the ‘Retail Trade’ Sector, and the industry is ‘Internet Retail.’

Amazon shares are known for their value and volatility; the traders can try to take advantage of the short term price movement. One way to try to profit from sudden and short term price fluctuation is by trading through Contract for Difference (CFD), which is a derivative contract. CFD allows you to speculate on the price movement of underlying asset from opening to closing of the trade.

Apart from the Bullish or Bearish market trends, the share price of Amazon is mostly influenced by earnings report, growth of the company, market share statistics, and any significant political or financial news. Amazon is such a large company that the rise and fall of prices is not a major cause of concern; however, the short term traders can try to gains due to price volatility.

The ongoing Coronavirus has impacted nearly all kinds of business, but Amazon is one of the few companies that has benefited. The Covid-19 outbreak has forced people to stay at home, which, as a result, has allowed people to use online shopping to buy their groceries, food, clothes, electronic devices, and other household items. In the USA alone, more than 42% of the population ordered online grocery. The online retail business is expected to touch almost $5 trillion at the end of 2020. The recent skyrocket surge in the share price of Amazon in the third week of July added a staggering $18 billion to the Company.

The information above is for education purposes only and cannot be considered as investment advice.