Amazon.com September 23 2011 - Rochester Institute of Technology

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Transcript Amazon.com September 23 2011 - Rochester Institute of Technology

Rochester Institute of Technology September 23, 2011 Kuldeep Shah Mayank Bindal

Many of the phrases, tables and graphs used in this presentation have been cribbed from some or all of the following sources: 10‐K, 10‐ Q, Thomson, Hoovers, Mergent Online, Yahoo Finance, S&P online research documents. This presentation is intended to synthesize these sources so that they can be used to analyze a specific company.

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 Company Overview  Industry Analysis  Ratio Analysis  SWOT Analysis  Valuation  Recommendation Financial Management Association September 23, 2011 3

 Opened “Earth’s Biggest Bookstore” in July95, with virtually unlimited shelf space  Expanded into almost all every retail category  Allows other individuals and businesses to sell products for fixed fees/sales commission  Manufactures and sells e-book reader Amazon Kindle  Provides technology infrastructure through Amazon web services  55% of sale from North America, 45% International (2010)  44% media products, 53% electronics & general merchandise, and other 3% Financial Management Association September 23, 2011 4

   Expected Launch – Thanksgiving Price comparable to iPad $499 to $829 Double as tablet Financial Management Association September 23, 2011 5

 Full-fledged tablet running Android OS  Multi touch with color display  UI custom designed by Amazon  Price same as NOOK by Barnes & Noble and $200 less than RIM PlayBook  Books delivered in under 60 seconds  Long battery life  Larger selection  Kid friendly Financial Management Association September 23, 2011 6

 No Google apps  No access to Google's Android Market  Multi-touch restricted to two fingers only  No camera  Only 6GB storage  Wi-Fi only  Cannot share content Financial Management Association September 23, 2011 7

        Amazon's Cloud drive, Instant video streaming & MP3 store already in place Preferred by age group - 50 years +, yet, big hit with universities and schools This age group accounts for almost 33% of the US population LINUX Open Source OS for developers Text-to-speech: Read textbooks to you Audio books big business Amazon already offers DRM-free music Established relationships with record companies, movie studios, publishers etc. = great content available on the new Kindle Financial Management Association September 23, 2011 8

 Source code released  Featured apps not given enough time to rake in the cash  Price - can buy Netbook in the same amount (more features) Financial Management Association September 23, 2011 9

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     Amazon Web Services (AWS) is the focus of the company’s cloud computing efforts, providing computing power, data storage, applications and more in Amazon’s data centers that users access via the Internet, or cloud Analysts say AWS will soon bring in $1 billion in annual sales for Amazon, roughly matching the sales of Amazon’s popular e-reader, Kindle AWS earned Federal Information Security Management Act (FISMA) Moderate Authorization and Accreditation, expanding the AWS Security and Compliance framework AWS solution provider and reseller URS-Apptis was awarded an Infrastructure-as-a-Service blanket purchase agreement (BPA) from the U.S. General Services Administration (GSA) Government agencies can now easily procure on-demand, highly reliable, highly scalable, and cost-efficient technology resources using the GSA IaaS BPA Financial Management Association September 23, 2011 11

     Capital intensive – technology, IP and supply chain - $1Bn CAPEX in 2010 Huge breadth and depth of product lines Customer trust and first mover advantage (user feedback system) Amazon Ranked 2 nd Financial Times most valuable U.S. General retailers in 2011 by Low switching costs for customers when shopping online Financial Management Association September 23, 2011 12

 Only about 8% of total U.S. retail sales were estimated to be e commerce transactions – 2010  Anticipated e-commerce share to be 11% by 2015 - $279 Bn  Internet penetration in US 76% Vs Global 27% Financial Management Association September 23, 2011 13

New Entrants - Capital intensive - Oligopolistic market - Vendor relationships Suppliers - Low bargaining power - High dependency Low Competitive pressure Customers - High bargaining power - Low switching costs Industry Rivalry -Enough leg room - Vendor base - Supply chain Threat of Substitutes - Kindle 2 nd mover - Other cloud computing players - E-bay and others Financial Management Association September 23, 2011 14

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Market Cap

Enterprise Value Beta Trailing P/E Forward P/E PEG (5 yr expected) Price/Sales Price/Book Enterprise Value/Revenue Enterprise Value/EBITDA

101.33 Bn

94.98 Bn 0.90

98.47

69.54

4.25

2.52

13.05

2.36

51.98

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Source: Jefferson Research Financial Management Association September 23, 2011 18

Source: Jefferson Research Financial Management Association September 23, 2011 19

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 We recommend to BUY 9 shares of Amazon.com Inc. on Sep 23, 2011 based on the information we have gathered and our resulting research, we feel that AMAZON.COM INC has the probability to OUTPERFORM average market performance for the next year. The company exhibits ATTRACTIVE company size, risk and 5-year annualize return.

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