Investeringsanalyse, R.J. Hottovy, 24/07/2015
Analysen af Amazon kan læses her
Amazon has played a key role in the structural shift away from brick-and-mortar retail, and it may lay waste to many other retailers in the years to come. Without the cost burden of physical stores, Amazon can price below traditional rivals and drive recurring traffic online. Even with online sales tax collection, we believe Amazon will maintain its consumer proposition through other means, including the convenience of Amazon Prime's expedited shipping and expanding digital content library. Aided by the network effect inherent in 285 million active users and recent fulfillment infrastructure, technology, and content investments, Amazon owns one of the wider economic moats in the consumer sector and is likely to remain a disruptive force in retail, digital media, and cloud computing.
Amazon's growth potential is undeniable. Key top-line metrics--including active users (a 21% compound annual growth rate the past five years), total physical and digital units sold (36% CAGR), and third-party units sold (46% CAGR)--continue to outpace global e-commerce trends, suggesting that Amazon is gaining share while fortifying its network effect. Nevertheless, with essentially break-even operating margins in 2014 (1.9% excluding stock-based compensation and amortization of intangibles), our fair value estimate seemingly requires a leap of faith based on whether Amazon will be able to monetize its growth.
We acknowledge that Amazon's margin expansion is less visible than its growth trajectory given its investment cycle, including international fulfillment infrastructure and content deals, AmazonFresh, tablets and other hardware, and new delivery capacity and technologies. Admittedly, some of the company's capital decisions haven't yielded strong returns (the Fire Phone, in particular). However, we're optimistic that Amazon can reach 6.5% operating margins by 2019 (8.0% excluding stock-based compensation and amortization of intangibles) based on Prime memberships and fee increases, sustainable 20%-plus segment margins for Amazon Web Services, fulfillment center scale ("getting closer to the consumer"), third-party sales, and early signs of profitable growth internationally.
Bulls say
- Amazon dominates the North American online retail landscape with 2014 product sales of almost $50 billion (excluding services), equal to roughly the next eight closest nonauction competitors combined.
- With more than half of the world's Internet users coming from developing markets, Amazon has sizable global growth opportunities.
- Kindle products and complementary devices like Fire TV and Amazon Dash represent intriguing customer acquisition and retention tools that capitalize on the shift to digital media while also promoting Prime memberships and cloud computing capabilities.
Bears say
- Amazon's margin expansion will likely be uneven at times given its investment needs and new sources of competition.
- We believe the market will be hesitant to reward the stock a premium without seeing stronger returns on capital investments. With an equity component common in many employees' compensation structures, we believe the company runs the risk of losing key personnel without stronger ROIC metrics.
- International growth brings unique challenges, including changing e-commerce regulations, infrastructure investments, and incumbent competition in some overseas markets.
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