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Amazon

Amazon.com. Covering Analyst: Scott Meyers smeyers4@uoregon.edu. Business Overview. Online retail operator through re-sales or third-party Emphasis on selection, Price, and convenience Diversifying product mix to compete with new firms. Strength in cloud computing and e-book readers.

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Amazon

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  1. Amazon.com Covering Analyst: Scott Meyers smeyers4@uoregon.edu

  2. Business Overview • Online retail operator through re-sales or third-party • Emphasis on selection, Price, and convenience • Diversifying product mix to compete with new firms. • Strength in cloud computing and e-book readers.

  3. Media • 32.64% of 2012 revenue • Retail sales of books, movies, music, digital downloads, software and video games. • Kindle and e-Books are primary drivers

  4. Electronics and Other Merchandise • 63.23% of 2012 revenue • Retail sales of items not included in media • Less mature business segment

  5. Other • 4.13% of 2012 revenue • Primarily generated from Amazon Web Services • Fastest growing segment

  6. Business Growth Strategies • Market share -price undercutting -distribution expansion • Organic growth • International expansion • Continued Acquisitions

  7. Industry Analysis • E-Commerce, Catalog and Mail Order House industry • Global industry $1 trillion by 2016 • New state sales taxes decrease bottom line • Growth: -Proliferation of broadband access -Lower prices, decreased shipping time -Cloud-based software as a service -Economic factors

  8. Revenue Model • Percentage of revenue • Geographic -International segment 50% of total over time -Growth of industry relative to AMZN market share • Product -Other and Electronics and Merchandise are fastest growing -Near future, media growth positive

  9. Comparables • Selected based on business model, growth rates, market risk, capital structure, margins, size • Google Inc. – 25% • Apple Inc. – 20% • Netflix Inc. – 30% • eBay Inc. – 25%

  10. Comparables Valuation

  11. DCF Assumptions • COGS: % of sales, downtrend projections as distribution and cloud services expand, margins increase. • R&D: % of sales, uptrend as a percentage, largely in part to a streaming duel with NFLX and increased cloud-computing • Depr. and Amort: Heavy investment into capex in near future, but then downtrend into perpetuity. • SG&A: % of sales, increase initially then decrease and level off. • Tax Rate: Higher initially as a result of increased sales tax, but then downtrend towards industry average, 26%

  12. Beta

  13. DCF Valuation

  14. Final Valuation

  15. Questions

  16. Recommendation • I recommend a buy for the Tall Firs portfolio. • Amazon.com is a dominant force in a rapidly expanding industry.

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