Amazon 📬

There aren’t many business stories like Amazon which have had such incredible success. The Amazon which existing 10 years ago is a shadow compared to the multifaceted Amazon we use today.

From powering websites and apps (to the tune of $35m+ revenue a year), to streaming movies and shows (over 112m paying subscribers), and even food delivery. In fact you would be surprised at what Amazon has tried and currently offers.

I won’t list everything and do a deep dive into each one, as that would require a lot of reading on your part as well as me thinking up lots of puns relating to each one (Alexa, tell me amazon puns.)

So how was the virus impacted Amazon? Are they suffering from a slow down in deliveries due to safety fears? Are they holding back on experiments and expansions while they wait for the world to settle down?

Absolutely not.

Amazon is not one to shy away from getting their hands dirty, for every piece of uplifting news there is a sob story hidden within. However, they have successfully made themselves part of everyday normal western life. For investors, this is the cash cow that doesn’t stop.

That said, being so large and so controlling, does make Amazon a target for governments around the world. The get it done and keep pushing attitude has been an issue for workers and governments alike, but the innovation being driven forward has undoubtedly changed our lives. That doesn’t make them completely immune from the law.

But does this really slow them down? Is Amazon the bringing of the next generation of innovation? What do the numbers tell us?

Unsurprisingly Amazon has some very punchy Quality ranks. There are few companies in the world that can match Amazon’s size with their profitability. By hooking into every aspect of the value chain when they enter a business, they control the lion share of the margins. What really drags the Amazon rank is the Capital Allocation, they are a business which reinvests back into it’self. The innovation and experiments are money hungry beasts and Amazon is not shy in feeding them. As a shareholder you hope the price by share keeps increasing, as they won’t be planning to pay anything out until there is nothing left to innovate.

You didn’t need Genuine Impact to know that Amazon is considered very expensive to buy. Both from a Value perspective as well as a share price view. In classic American fashion, Amazon loves their high price per share (UK companies typically do share splits to reduce the price per share and increase liquidity, however in the US it’s a point of pride to have an extremely high price per share.) It’s amazing to think how much revenue Amazon makes ($285.2bn in 2019) and they are still over priced!

In classic Amazon fashion, if you are interested in Quality and Value we think you might also be interested in Momentum. I am always amazed when you see extremely large companies ranking very highly. Our rankings work in a relative manner, meaning the results are relative to their own size and standardised so we can make a fair comparison. In short, a larger company has to do much more than a smaller one to move the needle. Amazon ranks unbelievably well for Momentum. No only are they are a high quality company and seeing some explosive growth and gains, the future prospects are extremely high as well.

Amazon fits the classic picture of an extremely high momentum company, which solid quality aspects, and a poor value ranking. Does this mean the future gains are completely priced in? Or is there more to be found and discovered? Will their new innovations move the needle or has it become expected of them?

Whatever your views are (and I would love to hear them!) I’m sure we can all agree we will have driverless Amazon cars which we rid in, ordering our weekly shop, while we get a notification that a delivery drone has installed our new blender which we ordered 15 minutes ago in our kitchen.

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Amazon is coming under fire for a few of their practices and more issues are coming to light.

With rumours going round about unfair firings, breaking lockdowns, forcing employees to work, and even monitoring which lots are “at risk of unionising”, it seems they are not far away from facing their own Uber style fallout.

A situation to monitor while Amazon continuities to build it’s share price.

Even with the tech Amazon workers calling in sick today (not the warehouse ones mind you, that would have a very serious impact!) Goldman Sachs has a very strong outlook.

The key change is:

raised its Amazon price target to a street high $2,900, implying 20% upside from current levels.

Aside from the normal reason why this is (massively increased demand for all their services.) There is a notable extra reason.

Bezos himself is back for the high impact project. Anything big, high impact, will have Bezos involved day to day. By and large this is another reason to be bullish on Amazon.

I think they will be a main beneficiary of COVID although I am not sure about that price target.