BUSINESS RESEARCH REPORT 0
Business Research Report
Background information About Amazon
Amazon.Com, Inc. was incorporated in 1994, in the state of Washington and reincorporated in 1996 in the state of Delaware. The company focuses to be earth most customer-centric company. The company is based on four principles such as customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-thinking. The target customer includes general customers, sellers, developers, enterprises, and content creators. The company further provides services such as sellers, vendors, publishers, and authors through their programs such as sponsored ads, display, and video advertising. The company serves consumers through online and physical stores and focuses on selection, price, and convenience.
Share price performance and compare it with the last few years’ prices
Amazon stock has experienced upward growth from 2016 to 2020 which reveals that the stock is highly valued and demanded by stakeholders.
The profitability ratios include gross margin, effective tax rate, and pretax margin. In the last four years, Amazon’s gross profit margin has increase from 22.14 to 36.26 which shows that the company’s performance to sales and production. It means that the revenue has grown and direct revenue cost remains constant and this explains why the gross profit margin remains high. The Net margin has increased showing a rise in the percent of income recorded as compared to the total revenue. The effective tax rate has declined from 2016 to 2019 which indicates an improvement in the net income reported at the end of the year.
The quick ratios measure the amount of liquidity available that can offset the current liability. Amazon’s liquidity has improved from 2016 to 2019 which shows that the company has higher than 50 percent capability to offset all total liabilities. The current ratios measure the short-term resources that Amazon can offset its current liabilities. The current ratio has improved from 2016 to 2019 which shows that the company can offset all current dues with its current liabilities. The debt to equity ratio shows the percentage of company financing that comes from creditors and investors. In 2016 investors financed more of the company assets as compared to equity. Overall, Amazon has financed more of the company assets. The interest coverage which computes how much time the EBIT can be rolled out to pay interest rates shows that from 2016 to 2019, the company can pay off its debts promptly because it has more earning that the interest rate payment.
The return of asset measures the net income produced by total assets during a period. It assesses the effectiveness of the company to manage its assets to produce profit during the period. Amazon.Com Inc, return on equity improved from 2016 to 2019 which shows that the company increases it is earning per dollars of assets invested. Return on investments measures the effectiveness of the investment which also the attractiveness of the Amazon investment based on the ratios recorded. The return on equity measures the effectiveness of the management in utilizing its equity to generate additional revenue. Amazon generated more per dollars of sales on each dollar of equity as per the ratios above from 2016 to 2019.
The earning per share measures the amount of net income earned per share of stock outstanding. It shows how profitable the company is for shareholders’ basis. Amazon.Com Inc, earning per share increased from 2016 to 2019 with the generation of $23.01 per each share of stock outstanding. Free cash flow shows the average cash that a company holds to distribute to each shareholder without affecting the sustainable development of their company. Based on the ratios from 2016 to 2019, the company has enough cash flow to distribute to shareholders without affecting the sustainable development project.
The receivable turnover shows how many times the company can turn credit sales to cash. The collection period as the ratios decline which shows that Amazon holds more credit sales. Inventory turnover indicates how long inventory is converted to sales. Based on the ratio from 2016 to 2019 financial year, Amazons coverts more inventory into cash each year. Total asset turnover measures the company’s ability to generate sales on each dollar of asset invested. The revenue generated per each dollar of asset decline from 2016 to 2019. Free cash flow represents cash an organization produces after cash outflows to help operations and keep up capital resources
Amazon is committed to gradually racking up investment to position itself for the future. The company has already made clear ambition in the transportation and logistics space. In India, Amazon has invested more than $ billion in the Indian growing internet market just invested a little more as it moves to expand its presence in the country brick and mortar space with a target of driving more sales in India (Pluimer-AMazonpov, 2020). The company has already acquired a 49 percent stake in the future coupon a group of entities owned by Indian second-largest retail chains. Still, it is looking forward to owning the internet and already plan are underway as it has leased over 200,000 square feet in Redmond, Washington for project Kuiper (Lyengar, 2020). The project focuses on a constellation of 3236 satellites deployed in low earth orbit for low latency.
Amazon is working on a range of low bandwidth, low poor, smart light, sensors, and other low-cost device customers at the edge of their home network. The current coronavirus pandemic has forced people to stay indoors and this has greatly affected global supply chain but to amazon is a positive milestone because there is less movement hence amazon fills the gap of global suppliers by shipping supplies for a supermarket and other physical retail stores. Still, due to advice by a specialist to stay at home, now Amazon cloud business is booming with the biggest client being Zoom (ZM) to Netflix for work and play (Fung, 2020). Amazon is selling audiobooks and original television programs to its clients. The e-commerce business experience positive uptick due to more reliance by customers who stay at home for fear of the virus. This trend predicts that the company is more likely to come out of the pandemic stronger than its competitors.
Conclude by predicting the stock price for early 2021
Amazon stock price could grow in the future to $2,455.51 based on expected rates of 0.018%. The financial ratios show a positive perspective for the company stock. The financial ratios that accelerate demand for stock such as earning per share and return on assets show an improvement in the ratios from 2016 to 2019 which could predict the future growth of the stock due to demand increase for the stock. The coronavirus pandemic offers an opportunity for stock growth due to growth in e-commerce. The cloud business is booming with the biggest client being Zoom. The performance of the company during this period and opportunities provided by the pandemic where most people rely on technology to purchase and order food online would lead to stock growth.
Amazon. Com.Inc.(n.d). Annual sec filling form 10-K: Retrieved from https://d18rn0p25nwr6d.cloudfront.net/CIK-0001018724/4d39f579-19d8-4119-b087-ee618abf82d6.pdf
Fung, B, (2020, April 9).The pandemic is playing to almost every one of Amazon’s strengths. CNN Business: Retrieved from https://edition.cnn.com/2020/04/09/tech/amazon-dominance-coronavirus/index.html
Lyengar, R,( 2020, January 6).Amazon’s India business is getting an offline boost. CNN Business: Retrieved from https://edition.cnn.com/2020/01/06/tech/amazon-india-future-retail-deal/index.html
morningstar. (n.d). Amazon.com Inc: Retrieved from https://financials.morningstar.com/ratios/r.html?t=AMZN
Pluimer-AMazonpov, L(2020, January, 10), Why 2020 could be year Amazon becomes unstoppable: FastCompany.Com: Retrieved fromhttps://www.fastcompany.com/90467660/how-a-nonprofit-youve-never-heard-of-made-the-web-safer-for-everyone
Yahoo. Finance.Com.(n.d). Amazon.com, Inc. (AMZN): Retrieved from https://finance.yahoo.com/quote/AMZN/history?p=AMZN