I - BUSINESS SUMMARY
Amazon.com, Inc. (Amazon), incorporated on May 28, 1996, is an American company listed on the Nasdaq. It operates retail web sites and provides programs that enable third parties (3P) to sell products on its web sites. The Company sources and sells a range of products to its customers and also manufactures and sells Kindle devices. It operates in two segments: North America and International. In May 2012, Amazon acquired Kiva Systems, Inc.
II - AMAZON ANALYSIS
We based our business plan on the past annual reports of Amazon and on the Market/Equity research of JP Morgan and Bloomberg as well as their forecasts.
2011 was an important tipping point in the evolution of Amazon: “Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold.” - Jeff Bezos (Amazon CEO), that same year. The mix shift to 3P continues today to change the Company from a retailer to a technology company and marketplace operator. Big investments were made to do so. Capital expenditure increased by 85% in 2011 and 109% in 2012 as you can see in Appendix 4, which can possibly explain the important D&A in 2011-2012.
The decrease in EBIT must therefore be put into perspective. Whereas Wall Street reacted to the 2011 Q4 results of Amazon, sending the shares down 10-12%, the stable 40% growth of Gross Profit in 2012 led to a stock appreciation of 45% (vs. +9% for the S&P 500). Moreover, 3P units grew 50% and 3P-FBA units grew a huge 78%. This shows the popularity of the FBA (Fulfillment By Amazon) program with sellers, fueled by strong consumerist buyers, and therefore justifying the FBA investment. On the other hand, analysts estimate that 3P sales should stabilize (moderate growth in 3P sales from 51% in 2012 to 37% in 2013), first-party margins could compress on greater international mix and more devices and finally Amazon could face tougher