Amazon.com, Inc.

Amazon.com, Inc. (NASDAQ: AMZN) is a significant online retailer and one of the top e-commerce aggregators, with an expected physical/digital online gross merchandise volume (GMV) of USD 578 billion in 2021. The company's three segments are North America, International, and Amazon Web Services (AWS). Customers are served through its online and physical locations, focusing on selection, pricing, and convenience.

Why should Investors Book Profits?

• Leveraged Balance Sheet: As of December 31, 2021, the company's debt/equity ratio was 0.52x, compared to the industry median of 0.14x. Furthermore, its long-term debt-to-total-capital ratio was 33.5%, compared to 9.4% for the industry during the same period. As a result, the company's exposure to balance-sheet risk has increased.
• Negative FCF: From USD 31.02 billion in FY20 to USD -9.07 billion in FY21 (ended December 31, 2021), the company's free cash flows (FCF) turned negative. Asset purchases or inorganic expansion plans may become more difficult for the company.
• Supply Chain Risks: With the ongoing disruptions in the global supply chain, AMZN is also exposed to order fulfilment risks. With China still in a state of near-lockdown, the supply chain shock is still developing and might take various forms. It remains to be seen how the US and global logistical systems will fare in this current stress test.
  

Valuation Methodology: Price/Cash Flow Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

AMZN's share price has remained stable throughout the year, surged only 6.02% in the past twelve months and is currently leaning close to the mid-band of its 52-week range of USD 2,671.45 to USD 3,773.08. We have valued the stock using the Price/Cash Flow multiple based relative valuation methodology and arrived at a target price of USD 2,829.54.

Considering the company's market dominance in commerce space, supply chain risks, negative free cash flows, unfavourable technical indicators, and current valuation, we recommend a "Sell" rating on the stock at the closing price of USD 3,366.93, as of April 04, 2022 . Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing.

1-Year Technical Price Chart (as of April 04, 2022). Source: REFINITIV, Analysis by Kalkine Group

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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