Amazon.com September 23 2011 - Rochester Institute of Technology

Report
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
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Industry Analysis

Ratio Analysis

SWOT Analysis

Valuation

Recommendation
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Opened “Earth’s Biggest Bookstore” in July95, with virtually unlimited
shelf space
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Expanded into almost all every retail category
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Allows other individuals and businesses to sell products for fixed
fees/sales commission
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Manufactures and sells e-book reader Amazon Kindle

Provides technology infrastructure through Amazon web services
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55% of sale from North America, 45% International (2010)

44% media products, 53% electronics & general merchandise, and
other 3%
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Expected Launch – Thanksgiving
Price comparable to iPad $499 to $829
Double as tablet
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Full-fledged tablet running Android OS
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Multi touch with color display
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UI custom designed by Amazon
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Price same as NOOK by Barnes & Noble and $200 less than RIM
PlayBook
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Books delivered in under 60 seconds
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Long battery life
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Larger selection

Kid friendly
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No Google apps
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No access to Google's Android Market
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Multi-touch restricted to two fingers only
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No camera
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Only 6GB storage
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Wi-Fi only
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Cannot share content
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Amazon's Cloud drive, Instant video streaming & MP3 store already in
place
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Preferred by age group - 50 years +, yet, big hit with universities and
schools
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This age group accounts for almost 33% of the US population

LINUX Open Source OS for developers

Text-to-speech: Read textbooks to you
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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
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Source code released

Featured apps not given enough time to rake in the cash

Price - can buy Netbook in the same amount (more features)
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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
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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 2nd most valuable U.S. General retailers in 2011 by
Financial Times
Low switching costs for customers when shopping online
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Only about 8% of total U.S. retail sales were estimated to be e-
commerce transactions – 2010
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Anticipated e-commerce share to be 11% by 2015 - $279 Bn

Internet penetration in US 76% Vs Global 27%
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Industry Rivalry
-Enough leg room
- Vendor base
- Supply chain
New Entrants
- Capital intensive
- Oligopolistic
market
- Vendor
relationships
Low Competitive
pressure
Suppliers
- Low bargaining
power
- High dependency
Threat of Substitutes
- Kindle 2nd mover
- Other cloud
computing players
- E-bay and others
Customers
- High bargaining
power
- Low switching
costs
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Market Cap
101.33 Bn
Enterprise Value
94.98 Bn
Beta
0.90
Trailing P/E
98.47
Forward P/E
69.54
PEG (5 yr expected)
4.25
Price/Sales
2.52
Price/Book
13.05
Enterprise Value/Revenue
2.36
Enterprise Value/EBITDA
51.98
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Source: Jefferson Research
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Source: Jefferson Research
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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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