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Amazon.com Inc AMZN

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Wage and Shipping Inflation Crimping Amazon’s Near-Term Margins; FVE Down to $4,100

Dan Romanoff, CPA Senior Equity Analyst

Analyst Note

| Dan Romanoff, CPA |

We are lowering our fair value estimate for wide-moat Amazon to $4,100 per share from $4,200, based mainly on margin pressures arising from hiring and shipping challenges, which we think may pressure profitability in the near term and, to a lesser extent, the long term. That said, we see shares as attractive. Amazon reported third-quarter results that came in above the midpoints of its guidance range for both revenue and operating income but were still shy of investor expectations. Guidance for the fourth quarter was modestly below our expectations but has little bearing on our long-term view. Meanwhile, the company continues to rapidly add capacity in order to meet customer demand and one day delivery, even as it roughly doubled its footprint during the past two years. We don’t see issues with the long-term story as Amazon remains well positioned to prosper from the secular shift toward e-commerce and the public cloud over the next decade, but we do see a modest reset in terms of growth and profitability through the next several quarters.

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Company Profile

Business Description

Amazon is a leading online retailer and one of the highest-grossing e-commerce aggregators, with $386 billion in net sales and approximately $482 billion in estimated physical/digital online gross merchandise volume, or GMV, in 2020. Retail related revenue represented approximately 83% of total, followed by Amazon Web Services' cloud computing, storage, database, and other offerings (12%), and advertising services and cobranded credit cards (6%). International segments constituted 27% of Amazon's non-AWS sales in 2020, led by Germany, the United Kingdom, and Japan.

Contact
410 Terry Avenue North
Seattle, WA, 98109-5210
T +1 206 266-1000
Sector Consumer Cyclical
Industry Internet Retail
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 1,298,000

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