Kindle Products:
Total Kindle products sold have increased from 0.36 million in 2008 to 43.9 million projected for 2013, with projections placing 2019 total Kindle products sold just shy of 100 million, indicating a segment of incredible possible growth.
Cloud Services:
Cloud and other web services accounts for 8.34% of overall business, with revenues derived from the segment increasing from $0.54 billion in 2008 to $3.55 billion projected for 2013, with projections placing 2019 revenue derived from the segment at $17.6 billion. The explosive trend of cloud services presents the opportunity to Amazon.com, Inc. (NASDAQ:AMZN) to capitalize and derived growth from the segment.
Acquisitions:
Amazon has a long history of successful acquisitions which have allowed the company to add innovative and distinguished services to its portfolio of offerings, and further acquisitions could allow the company to further innovate and capture new customers.
Threats:
Implementation of Sales Tax Program:
One of the main advantages of buying on Amazon.com opposed to purchasing the same item at a brick-and-mortar location is the lack of sales tax, but over the past years a strong push by state governments has occurred which has resulted in many states instating a law implementing a sales tax on items sold on Amazon, threatening business
advantage.
Competitors:
Major publicly traded competitors of Amazon include eBay Inc (NASDAQ:EBAY), Mercadolibre Inc (NASDAQ:MELI), and Best Buy Co., Inc. (NYSE:BBY).
eBay Inc (NASDAQ:EBAY) is valued at $70.21 billion, does not pay out a dividend, and carries a price to earnings ratio of 26.19. eBay Inc (NASDAQ:EBAY) competes with Amazon on the internet platform and poses a major threat to Amazon’s business, but fundamentally their platforms differ. The company’s business appears strong with a TTM profit margin of 18.68%.
Mercadolibre Inc (NASDAQ:MELI) is valued at $5.06 billion, pays out a dividend yielding 0.50%, and carries a price to earnings ratio of 50.65. Mercadolibre poses a threat to Amazon.com, Inc. (NASDAQ:AMZN) in Latin American markets, but does not infringe on its core North American market. Fundamentally, the company is solid with a TTM profit margin of 25.24%.
Best Buy Co., Inc. (NYSE:BBY) is valued at $9.32 billion, pays out a dividend yielding 2.47%, and carries a negative price to earnings ratio. Best Buy’s core business is focused on traditional brick and mortar stores, thus not posing a paramount threat to Amazon’s core business. Fundamentally, Best Buy Co., Inc. (NYSE:BBY)’s business model is flawed with a -0.50% TTM profit margin.
The Foolish Bottom Line
Financially, Amazon could not be stronger. The company possesses explosive revenue growth, a leading market position, and a strong free cash flow position. The major weaknesses of the company include its lack of dividend and premium valuation. Looking forward, the company will experience sustained accelerated growth stemming from the fundamental shift of retail sales to Internet platforms and gains in market share. All in all, Amazon is an incredibly strong company financially that will experience
substantial growth into the future, however shares come at a premium. Amazon earns four out of five stars, and is a buy on any substantial pullback.
The article The Trailblazer at the Head of the Online Retail Revolution originally appeared on Fool.com and is written by Ryan Guenette.
Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, eBay, and MercadoLibre. The Motley Fool owns shares of Amazon.com, eBay, and MercadoLibre. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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