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Amazon looking at a good earning season

Amazon.com Inc  AMZN

Summary (from latest annual 2016 report)

  • Total stockholders' equity : 19.28 billion USD
  • Market Cap is 434.6 billion USD ( last price of the stock is 909.26 USD)
  • Amazon.com Inc is an online retailer. The Company sells its products through the website which provides services, such as advertising services and co-branded credit card agreements. It also offers electronic devices like Kindle e-readers and Fire tablets.
  •  Total stockholders' equity has increased from 13.38 billion USD in 2015 to 19.28 billion in 2016
  • Company has 19.33 billion USD in cash on account (from latest annual report)
  • Company has 1.83 billion USD treasury stock
  • In 2016 company had 7.69 billion USD long-term debt, short – term debt was zero (In 2015 company had 8.23 billion USD long-term debt , short-term debt was zero)
  • Company's revenue increased in 2016 to 135.98 billion USD from 107.06 billion in 2015
  • Net income in 2016 was 2.37 billion USD, Net income in 2015 was 596 million USD
  • Amazon currently pays no dividend

Opinion about the company

Fundamentally it is a good company and in the future we can expect its growth (Total debt is acceptable, big amount of cash on company's account, ROE is around 14 %).

 

Business and revenues should grow in the future but price of the stock is expensive

Amazon.com, Inc., often referred to as simply Amazon, is an American electronic commerce and cloud computing company with headquarters in Seattle, Washington. It is the largest Internet-based retailer in the world by total sales and market capitalization. Amazon has separate retail websites for the United States, the United Kingdom and Ireland, France, Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan, China, India and Mexico. Amazon also offers international shipping to certain other countries for some of its products. Amazon issued its initial public offering of stock on May 15, 1997, trading under the NASDAQ stock exchange symbol AMZN, at a price of US$18.00 per share ($1.50 after three stock splits in the late 1990s). Amazon has approximately 230,800 full-time and part-time employees.

Amazon is a company that continuously tries for innovation, to bring a change in the industry, of course, under its current leadership. Sales increased 20%, 20%, and 27% in 2014, 2015, and 2016, compared to the comparable prior year periods. North America sales increased 23%, 25%, and 25% in 2014, 2015, and 2016 compared to the comparable prior year periods. The sales growth in each year primarily reflects increased unit sales, including sales by marketplace sellers. International sales increased 12%, 6%, and 24% in 2014, 2015, and 2016, compared to the comparable prior year periods. Media (represents 21% of total revenue), Electronics and other general merchandise (represents 70% of total revenue) , AWS (represents 8% of total revenue), other activities (represents 1% of total revenue).

With Amazon facing competition from numerous fronts, its profitability and growth from its important AWS segment has been declining, and will likely continue to as well. Management gave Q1 2017 guidance, which was a bit disappointing to analysts. For Q1 2017, AMZN expects revenue of between $33.25B- $35.75B, representing 14% to 23% growth. However, analyst consensus was for $35.95B. Analysts expect Amazon to generate revenue of $169,319 billion (YoY growth 24.5%) in FY 2017 and $213,320 billion (YoY growth 26.0%) in FY 2018.

The fundamentals of the company are not bad: total debt is acceptable, revenue for fiscal 2016 was $135.98 billion (an increase of 27% compared to 2015), net income in 2016 was 2.37 billion USD.. but with 434 billion USD market capitalization this company/stock is too expensive. 

 

Technical analysis

When we look at two years chart we can see that price of AMZN is moving in "uptrend". As long the price is above this trend line this stock is in the "BUY" zone and there is no indication of the trend reversal. If the price falls on the trendline and if we get "bullish" confirmation candle it would be a very good entry point for short-term traders who are trading with "stop loss" and "take profit" orders. Trend line represents very strong support level, if the price breaks this trend line it would be a very strong "SELL" signal and we have an open way to $800 ( this is also very strong support level). If the price jumps above $950 (short term resistance level) that would be a confirmation of "BULLISH" trend and open way to $1000.

 

Conclusion

Amazon is a company that continuously tries for innovation, to bring a change in the industry, of course, under its current leadership. Sales increased 20%, 20%, and 27% in 2014, 2015, and 2016, compared to the comparable prior year periods. AMZN expects its earnings per share and revenues to increase for the upcoming year. The fundamentals of the company are not bad but with 434 billion USD market capitalization this company/stock is too expensive. Negative thing is that there is an increase in the number of investors who are betting on the bearish trend for the stock, this is also my opinion and I would not recommend investing in this stock (only as short term trader with "stop loss" and "take profit" orders).

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