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Comprehensive firm analysis

Comprehensive firm analysis. Section 2 Specialty Retail Amazon Inc. Sophie Yu. Introduction of amazon. Online retailer since July 1995 Currently offers biggest selection on the earth Also provided services Advertising Co-branded credit card agreements Current Issues

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Comprehensive firm analysis

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  1. Comprehensive firm analysis Section 2 Specialty Retail Amazon Inc. Sophie Yu

  2. Introduction of amazon • Online retailer since July 1995 • Currently offers biggest selection on the earth • Also provided services • Advertising • Co-branded credit card agreements • Current Issues • Account Receivables • Tax reform • Consumer confidence is recovering, but there’s a limit • Moving into overseas (Europe case) • Freight cost increases • Huge R&D expenses • Construction in process and capital leases

  3. Expanded NEA

  4. Expanded NEA

  5. Expanded NFL

  6. EXPANDED EPAT

  7. Accounting adjustments • Operating leases • Stock-based compensation • (Details in Mod 11)

  8. WACC • β=0.903 • Cost of Equity:10.94% • Cost of Debt: 4.5% • WACC: 11.09% Market Value: $149,366

  9. VALUATION • DCF (only a part of the valuation model)

  10. VALUATION • REI

  11. VALUATION • AEG

  12. Why overvalued by market • Over-optimistic forecast of sales growth • Tax legislation • Competition from emerging online specialty retailers • Prime membership • Under estimated cost • R&D • Distribution centers and other buildings construction and leases • Over valued merger and acquisition • Slowed down in recent years • Size of mergers decreased • Business relationships and strategic alliances • Pricing limit • Current sales growth driven by reduction in price

  13. Profitability analysis • Amazon is actually not comparable to the other three companies in this industry

  14. Questions?

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