It's time to break down one of the most well-known names in the market. Here is the breakdown of $AMZN, better known as Amazon.
Current Price: $3,154.98
52/Wk High: $3,552.25
52/Wk Low: $1,626.03
Market Cap $1.6 trillion
Read below for the breakdown!
Amazon is a major online retailer with products or services in what seems to be in nearly any product or service type you can think of.
Due to the pandemic, Amazon's already booming business growth has been further accelerated, begging the question as to whether Amazon stock is still a buy.
Digging into the price of the stock itself, the price can be broken down by segment according to TREFIS (@trefis) data. According to TREFIS, 46.6% of Amazon’s stock price is based on the Amazon Web Services segment.
Furthermore, 36.0% is based on the Amazon North America segment, 15.6% based on the Amazon International segment, and 1.8% based on cash (and or net of debt).
Given this, it is worth taking a look at Amazon's most recent earnings report, the Q3 report. Amazon beat expectations in the third quarter, reporting an EPS of $12.37 versus the expected EPS consensus of $7.41.
Not only that, but Amazon reported stellar revenues, with Q3 revenues coming in at $96.1 billion, representing 37.39% growth year-over-year. Reading further into the quarterly earnings, Q3 was great.
Amazon reported operating cash flows of $55.3 billion, representing 56% growth, and a great free cash flow level of $29.5 billion, up from the 2019 same time cashflow level of $23.5 billion.
When it comes to operating income Amazon did not slack in Q3. Amazon reported Q3 operating income of $6.2 billion, up from the dismal $3.2 billion in 2019.
Amazon also continued to expand, hiring hundreds of thousands of employees for their already massive workforce and further building out expansion in foreign markets such as India.
The guidance was also solid even though it missed expectations. Amazon expects net sales of $112.0 billion to $121.0 billion (Growth of 28% to 38%) in Q4 along with operating income of $1.0 billion to $4.5 billion.
It is important to note that operating income was less than expected due to Amazon's expectations that the company will spend $4.0 billion on COVID-19 related expenses.
Shifting into the balance sheet, the numbers are not bad.
Total Debt: $50.574 billion
Total Liabilities: $199.404 billion
Total Assets: $282.179 billion
Cash & Short Term Inv: $68.402 billion
On the valuation side of things, Amazon does trade at a premium, but given its future growth outlook, it's not a huge worry.
Price to Earnings: 87.99x
Price to Sales: 4.33x
Price to Book: 18.22x
Price to Cash Flow: 29.45x
Taking in the numbers analysts remain very bullish on Amazon. Currently, the mean price target is $3,818/share, representing a 17.51% gain.
The high price target is $4,500/share, representing a 38.48% gain, all the while the low price target is $3,048/share, representing a 6.20% loss.
The big money on the other hand is not as bullish. Currently, only 57.73% of Amazon is owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.
Finally, going into the technicals the six-month charts could be a flashing opportunity, with the MACD entering a downward momentum run around -4.853.
The six-month charts are also indicating an RSI of 47.47 and CCI of -25.487 both of which are somewhat attractive when considering a position. It is also important to note that Amazon currently trades roughly 400 points off its highs.
In short, I like Amazon both short and long given its consistent pattern of winning, growth prospects, and current state of the COVID-19 pandemic.
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Disclaimer: This is not direct financial advice, simply an opinion based on independent research. Luke Donay does own $AMZN stock long.