Exxon vs. amazon

EXXON AND AMAZONDele Dina, Frank Graham, Hyun Sik Kim, Katrina Damschroder,

Layan Barghouthi, Hassan Haider

Agenda● Short Term Investment Criteria

o Justificationo Outlook

● Long Term Investment Criteriao Justificationo Outlook

Our RecommendationsShort-Term● Amazon (AMZN)● Buy for the year,

reevaluate at the end of the period

● Must be willing to take risk

Long-Term● Exxon Mobil (XOM)● Buy and hold, ride out

oil price volatility● Long term prospects in

alternatives will also improve company standing forward

Amazon- Short Term● Currently Trading (4/20) at $389.51● Analyst Estimate of $400.00 (Analyst

Median)● EPSxP/E Price: N/A*● 2014 Revenue: 88.99B● Profit Margin: -.27%● ROE: -2.35%● ROA: .24%

Amazon● Amazon consistently records a loss.

o *This, in turn, prevents us from calculating P/E, so it is difficult to come to an appropriate share price without a proper valuation model.

● However, despite this lack of profitability, Amazon’s stock has performed exceptionally well.

● No dividend declared or paid

Amazon Point and Figure Chart

Amazon Candlestick Chart

Amazon

Amazon Analyst Estimates

EPS Trends Current Qtr.Mar 15

Next Qtr.Jun 15

Current YearDec 15

Next YearDec 16

Current Estimate -0.12 -0.16 0.41 2.30

7 Days Ago -0.12 -0.17 0.40 2.27

30 Days Ago -0.12 -0.17 0.43 2.27

60 Days Ago -0.12 -0.17 0.42 2.28

90 Days Ago 0.18 0.01 0.82 3.23

Amazon- Outlook● Amazon has made consistent investments in

expanding and improving their business model.

● As such, some of these benefits should be realized in the next year

● Additionally, Amazon has an array of services lined up for release in the near future, which may help increase revenue and NOI.

Amazon- Outlook

● Operating margin expansion should continue to benefit from the shipping loss moderation

● Normalization of the international growth rate● Amazon Web Services (AWS) may generate several billion dollars in

revenue and prove to be the fastest-growing piece of Amazon’s business

● Recent approval of drone shipment technology● In the investment period, summer shopping season, back to school,

and holiday season should be strong times for sales and growth● Expansion of services across the Amazon platform

Exxon- Long Term● Trading at $86.93● P/E x EPS= $87.02● Slightly undervalued, room for growth● On a downward slide, opportune time to buy

in● Median target at $92.00

Exxon

Approximately 7% ROA Approximately 19% ROE Approximately 9% Profit Margin Strong capital management and effective

cost controls 2014 Revenue: 369.43B

Exxon● 95% of revenue is tied to oil operations

o Short term volatility is a risk, but long term stability and price increase will bolster revenues

● Expanded investments in alternative energy and drilling locations

● $.69 per share dividend- regular cash flow through duration of investment

Exxon● Oil prices are expected to hover in the $50 to

$70 range through the next two years● Increase from recent volatility will help

generate revenue● Historically strong performer with regular

dividend payments● Expansion of non-oil operations

Exxon - Point & Figure

Exxon Candlestick Graph

Exxon

Exxon Mobil Analyst Estimates

EPS Trends Current Qtr.Mar 15

Next Qtr.Jun 15

Current YearDec 15

Next YearDec 16

Current Estimate 0.82 0.81 3.74 5.25

7 Days Ago 0.84 0.84 3.78 5.31

30 Days Ago 0.82 0.84 3.79 5.35

60 Days Ago 0.77 0.81 3.67 5.32

90 Days Ago 1.09 1.10 4.88 6.21

Exxon and Oil Prices● Per barrel extraction cost: $12.72

(Bloomberg)● Any price above this level allows Exxon to

cover their production cost

Exxon- Outlook

● Investments in the Arctic, the ultra-deep sea, & the oil sands of Canada

● Anadarko Petroleum is considering selling its multi-billion dollar stake in Mozambique's giant gas reserves, Exxon is leading contender

● Lubricants for wind, nuclear, and geothermal energy sources that enhance efficiency

● Consistently strong and effective in managing capital and maintaining financial flexibility

Month AMZN (87 shares)

XOM(389

shares)

Relative Strength

1 33,843 33,843 1.00

2 33,060 33,454 0.98

3 32,799 33,065 0.99

4 32,103 35,010 0.92

5 28,014 33,454 0.84

6 27,492 35,010 0.78

7 27,492 36,177 0.75

8 26,448 35,339 0.75

9 33,495 35,788 0.94

10 28,275 37,344 0.76

11 29,496 38,511 0.77

Questions