Rochester Institute of Technology September 23, 2011 Kuldeep Shah Mayank Bindal.
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Financial Management Association
Rochester Institute of TechnologySeptember 23, 2011
Kuldeep ShahMayank Bindal
2
Many of the phrases, tables and graphs usedin this presentation have been cribbed fromsome or all of the following sources: 10‐K, 10‐Q, Thomson, Hoovers, Mergent Online, YahooFinance, S&P online research documents. Thispresentation is intended to synthesize thesesources so that they can be used to analyze aspecific company.
Financial Management Association September 23, 2011
Disclaimer
Financial Management Association September 23, 2011 3
Company Overview
Industry Analysis
Ratio Analysis
SWOT Analysis
Valuation
Recommendation
Agenda
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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%
Company Overview
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Expected Launch – Thanksgiving Price comparable to iPad $499 to $829 Double as tablet
Kindle
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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
AMZN Kindle SWOT AnalysisStrengths
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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
AMZN Kindle SWOT AnalysisWeaknesses
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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
AMZN Kindle SWOT AnalysisOpportunities
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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)
AMZN Kindle SWOT AnalysisThreats
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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
Amazon Web Services LLC (AWS)
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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
Biz Dynamics
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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%
Industry Analysis
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Porter’s Five Forces
Low Competitive pressure
Industry Rivalry-Enough leg room- Vendor base- Supply chain
Threat of Substitutes- Kindle 2nd mover- Other cloud
computing players
- E-bay and othersCustomers- High bargaining
power- Low switching
costs
Suppliers- Low bargaining
power- High dependency
New Entrants- Capital intensive- Oligopolistic
market- Vendor
relationships
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Key Financials
Market Cap 101.33 BnEnterprise Value 94.98 BnBeta 0.90Trailing P/E 98.47Forward P/E 69.54PEG (5 yr expected) 4.25Price/Sales 2.52Price/Book 13.05Enterprise Value/Revenue 2.36Enterprise Value/EBITDA 51.98
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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.
Recommendation - BUY
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