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Amazon.com Inc AMZN

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Amazon Expands Video Library With MGM Studios Acquisition; FVE Still $4,200

Dan Romanoff, CPA Equity Analyst

Analyst Note

| Dan Romanoff, CPA |

On May 26, wide-moat Amazon formally announced the acquisition of privately held MGM Studios for $8.45 billion; the deal had been rumored for several days. No timing has been provided, but we do not expect regulatory delays. While the deal is immaterial relative to Amazon’s $1.6 trillion market cap and we are not adjusting our $4,200 fair value estimate, we see this move as strategically important as the company adds more content to its Amazon Prime Video library. MGM’s content spans movies, scripted and unscripted television, video games, and podcasts. Notably, MGM owns a variety of franchises including James Bond, Rocky, Pink Panther, The Handmaid's Tale, and Real Housewives and boasts a catalog of more than 4,000 movies and 17,000 TV episodes. We think Amazon must continue to expand its content library to remain one of the relevant streaming players. We can envision the company justifying an increase in Prime membership prices next year based on the MGM acquisition.

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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 Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 1,298,000

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