Amazon (AMZN) - Overview, Growth Drivers, Risks, and Stock Recommendation
Amazon (AMZN) is a global e-commerce and cloud computing giant, known for its strong growth potential in segments like AWS and advertising. The company, founded in 1994, has diversified revenue streams and focuses on disruptive innovation. However, it faces stiff competition, profit uncertainty due to narrow margins, and risks from high interest rates and a weak economy. The stock recommendation team suggests a Buy rating for AMZN with a price target of $125.15, implying an upside of 8.31%.
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Consumer Discretionary Stock Recommendation Team: Sean Buck & Sriharsh Adari
Sector Review Consumer Discretionary is cyclical Desired goods but not essential Consumes 12.23% of S&P 500 as a sector Market Cap: 6.78T Largest Companies: Amazon Tesla
SIM Portfolio Standing Sector Consumer Discretionary S&P 500 Weight 10.63% S&P Weight 8.86% +/- -1.75 Stock Unit Cost Total Cost Market Price Market Value Unrealized Gain / (Loss) Estimated Annual Income Beta AMZN 52.39 $136,206.97 106.21 $276,146.00 $139,939 $0.0 1.18 GM 29.54 $221,276.49 31.76 $237,882.40 $16,606 $0.0 1.24 TJX 67.53 $292,390.85 55.85 $241,830.50 ($50,560) $5,109.4 1.07
Amazon Company Overview Overview Growth Drivers Risks Valuation Ticker AMZN Sector Consumer Discretionary Industry Internet Retail Price as of 7/9/22 115.54 Market Cap $1.18 T Shares Outstanding 10.17 B Stock Rating Buy Price Target 125.15 Implied Upside 8.31%
Amazon Overview Amazon.com Inc. (AMZN), one of the largest companies in the world, is a global leader in e- commerce and cloud computing. Founded in 1994, Amazon started out as an online bookstore. But its founder and former chief executive officer (CEO), Jeff Bezos, envisioned Amazon as more than merely an online retailer. Its delivery network has expanded as its customer base continues to grow. It has 253 fulfillment centers and 467 delivery stations across North America. AWS, Amazon Advertising and Amazon Prime remains a fantastic business with a lot of runway for growth. Amazon expanded into several business channels and has seen massive growth over time with 10- year stock price increase of 1826% at the end of 2021
Amazon Growth Drivers & Risks Growth Drivers Risks Business Segments with strong Growth Potential : AWS growing at a rate of 37% yoy. Amazon said its advertising business is growing 32%, and booked $31 billion last year. representing an annualized sales run rate of nearly $74 billion. Strong Ecosystem: over the last two years, the consumer business has grown meaningfully and has required the doubling in size of the fulfillment network. invested significant capital in its in-house logistics and shipping capabilities Diversified Revenue Streams and Disruptive innovation: Amazon continues to innovate in retail space with Amazon GO Technology, Amazon One and expanding its presence in physical stores levering these technologies with Amazon Fresh and Whole Foods. More recent Other new segments Health Care, Logistics, Home Security among others. Amazon Innovations in various areas are available here . Competitionis the most salient operational risk from retail giants like Wal-Mart, Costco, with physical centers and category specialists. Profit Uncertainty: It operates with very narrow profit margins and was not able to sustained net profits during the early to mid-2010s. Prior to 2019, the highest full-year net margin is in 2009 which was 3.7% High Interest Rates & Weak Economy: The sector suffers in a declining economy, especially when there are high rates of unemployment. Operating Margins: Failures to adequately predict customer demand or otherwise optimize and operate our fulfillment network and data centers successfully from time to time result in excess or insufficient fulfillment
Amazon Valuation Overall Recommendation: BUY Amazon, Inc (NASDAQ: AMZN) with a price of $115.54 and an implied upside of 8.31 %. Conclusion: Amazon is currently slightly undervalued and much of their current share price has speculation associated with Interest rates hikes, inflation, supply chain issues, and operating costs to maintain excess capacity Amazon invested during covid, these issues are temporary. If Amazon is able to effectively implement their cost cutting measures over the next 6-12 months, Amazon s value will increase over the current share price.
Target Company Overview Overview Growth Drivers Risks Valuation Ticker TGT Sector Consumer Discretionary Industry Retail Price as of 7/5/22 140.81 Market Cap $71.83 B Shares Outstanding 463.7 M Stock Rating Buy Dividend Yield 2.79% Price Target 237.59 Implied Upside 68.7%
Target Growth Drivers & Risks Growth Drivers Risks Best-in class omni channel shopping experiences: Invested heavily in developing best in class omni channel shopping experience. Customers can now choose several fulfilment options, including the traditional buy online, with the items shipped to their homes for free and immensely popular same day deliver service Profit Uncertainty: If capital Investments in remodeling existing stores, building new stores, improving technology and expanding supply chain infrastructure do not achieve appropriate returns than Target s competitive position, financial condition and results of operations could be adversely affected. Same Day Delivery: Target is taking measures to right-size its inventory for the balance of the year and create additional flexibility to focus on serving guests in a rapidly changing environment. These actions are intended to further build on the Company's record of growth and market-share gains. Post Pandemic Adjustments: Target has benefited from supply chain shortages at competitors, allowing it to capture sales at higher profit margins. The update on June 7 essentially said those excellent times are abruptly over. The company expects its operating profit margin to be 2% in its second quarter. That was down from the initially expected 5.3%. Management has started a bold discounting campaign to get unwanted inventory off the shelves.
Target Valuation Overall Recommendation: BUY Target, Inc (NASDAQ: TGT) with a price of $140.81 and an implied upside of 68.7 %. Conclusion: The stock is now trading at a price-to- earnings ratio of 11.5, near the lowest it has sold for in the past decade. Investors can undoubtedly start buying Target's stock now. Or they can place the stock on their watch list and observe how the inventory liquidation goes over the next few quarters before starting a position.
General Motors General Motors designs, manufactures and sells cars, trucks, and automobile parts It also provides automotive financing services through General Motors Financial Company The lines of business include manufacturing and assembly plants and distribution centers in the United States, Canada, and other countries. Sells cars under the label of Chevrolet, Buick, GMC, and Cadillac
General Motors Valuation Growth Driver Electric Vehicles Battery Manufacturing Margin Expansion Risks Inflation Weak Supply Chain Current Price: $31.20 Target Price: $56.36 Terminal Discount Rate: 11% Terminal FCF Growth Rate: 1%
Home Depot Home Depot is the world's largest home improvement retailer Home Depot sells tools, construction products, appliances, and services Over 2,200 stores in three different countries
Home Depot Valuation Current Price: $299.83 Target Price: $349.09 Terminal Discount Rate: 9% Terminal FCF Growth Rate: 2.8% Growth Driver Strong Demand For Homes Expanding into Other Markets Dividend Growth Risks Inflation Weak Supply Chain Consumer Spending Slow Housing Market
Recommendation Buy Amazon Buy Target 15.89% upside 68.70% upside Current price $115.54 Current price $140.81 Target price $133.90 Target price $237.59 AWS, Amazon Advertising and Amazon Prime remains a fantastic business with a lot of runway for growth. Currently Stock is undervalued stock and at a good price to buy. The stock is now trading at a price-to-earnings ratio of 11.5, near the lowest it has sold for in the past decade. Its delivery network has expanded as its customer base continues to grow. Hold GM Buy Home Depot 10% upside Adds diversity Current price $31.20 5% upside Target price $56.36 Current price $299.83 Positive Upside and Electric Vehicle sector Target price $349.9 Supply Chain is recovering slowing and hence more cars would be produced in near term It has Sustainable Dividend Yield, higher than S&P 500 Profit is expected to grow in double digits over the next couple of years.
