AMAZON PERFORMANCE AND ANALYSIS 9
AmazonPerformance and Analysis
AmazonPerformance and Analysis
Theperformance of a company is based on different aspects of itsbusiness operations. Therefore, to evaluate the performance, it isimperative to use financial data that reveal the true and fair viewof the organizational position in relation to a period of time. Inlight of this, this paper will evaluate financial performance andposition of Amazon, an American ecommerce company. To review itstimely accuracy, this paper will use data of the company of the lastfive years. In addition, this paper will analyze the company inrelation to its management environment and external factors thatfeature the company in the public dominion. All this analysis aims atdecision making of whether to invest in the company or not.
FinancialPerformance and Position
Basedo the past financial performance trends, Amazon is a company that aninvestor would be intended to invest in. In the last five years, thecompany has recorded an increasing trend of earnings in terms of netincome. According to the Amazon financial reports, the company made$1,152 million in the year 2013 (Google Financials, 2014). Accordingto Business Week (2014), this reflects an 82.56 percentage increasein the net profit from the previous year’s 2012 net profit of $631million. In the year 2011, the company recorded a loss, a drop froman impressive $279 million net profit (Business Week, 2014). Thistrend shows a stable company that is attracting investor confidencein the future.
Inthe recent financial performance reports, the company recorded anincrease in the revenues in the first quarter of 2014. According toYahoo Finance (2014), the company made $19,741 million dollars in thefirst quarter of 2014, which shows a decline in revenues from $25,587in the last quarter of the previous year. However, the company hasheld a steady rise in comparison with other quarters of the year2013. According to Nasdaq (2014), the revenues of the company havebeen rising in the for the last five years. The company recorded$34,2010 million in 2010, rose to$ 48,077 million in 2011, rose to$61,093 million in 2012 and rose to $74,452 million in 2013 (Nasdaq,2014).
Thefinancial position of the company has been stable for the last fiveyears. The firm’s level of assets has increased for the lastfinancial position. The internet company has recorded a growth in thebalances the cash and cash equivalents for the year 2010 was $3, 777million, which increased to $5,269 in the year 2011, a trend that ledto an $8,084 figure in the year 2012 (Yahoo Finance, 2014). Thistrend increased to $8658 in the year 2013 which has shaped the trendfor the current year 2014 (Nasdaq, 2014). As expected for a growingcompany, the liabilities have grown with the same trend, but with abalanced growth tat in all the five years have not surpassed thehealthy levels of working capital.
Asan investor, it would be worthwhile considering investing in thecompany. This decision would be well informed of the increasingtrends in the financial performance of the company in terms ofrevenues and net profit. Over the last five years, the company hasrecorded steady revenue that can sustain its operations and expansesand leave revenues of investors. In terms of financial position, thecompany has a stable base of current assets that can cover thefinancial liabilities of the online commerce giant (USSEC, 2014). Thecompany’s total assets have increased annually with a higherpercentage that surpasses the liabilities, good enough to leave thecompany into a stable financial position.
Thecompany’s current stock price as of June, 11 2014 was $335.20(Nasdaq, 2014). According to Nasdaq (2014), this stock pricerepresents an immediate increase of $2.79 with a margin of 0.84%which indicate an upward trend. On the day, 4.4 million stocks weretraded at the prevailing price (Nasdaq, 2014). To the investor, thissignals an active stock that can be sold at any time in case of ananticipated change in financial goal from long-term capital gains toshort-term gain. This means that the investor would still make a gainin the value of investment, in terms of return on investment as wellas the return of investment.
Accordingto Amazon Revenue Reports (2014), the stock price has been on therise, with an upward trend since 2007. The potential of the return oninvestment of the firm over the last four quarters of the recent yearhas been stable. In the first quarter of the year 2014, the earningper share was 0.23, down from the closing quarter of 2013 which was0.51, a rise from the previous quarter of the same year. According toAmazon Revenue Reports (2014), the company has not yet paid outdividends or declared any dividends from the financial results of thecompany in 2013. This indicates a signal for capital appreciation foran investor keen on long-term capital gain of his investment in theinternet firm.
Themanagement of the company is solid, led by the founder, the CEO andPresident, Jeffrey Bezos (Amazon, 2014). According to his statementsin the audited financial statements of 2013, Bezos stated that thecompany’s expected source of revenues is commitmenttocommitteduality service to customers (Amazon Annual Report, 2014).The president of the internet giant further outlines the management’scommitment to the value addition of investors’ stake in the companyby increased and sustainable long-term growth in cash flow per share(Amazon Annual Report, 2014). Therefore, the management of thecompany seeks to reduce variable costs and focus its investments intocash generating activities and programs.
Theabove highlights by the management proves that the leadership of thefirm is based on the revolutionary growth trends of the company sinceits foundation in 1995.through the leadership, the company aims atspreading its strength in technology and adopt several platforms thatwill help it achieve its goals (Amazon Annual Report, 2014). Thecompany’s management suggests a visionary organization that iscommitted to the future success of the firm, despite being led by thefounder since the beginning. However, the investor would be keen tonote the future changes in the event of a transfer of authority andmanagement at the firm. Despite the uncertainty, the company iscompact enough in its market position, to guarantee the confidence ofthe investor to invest in its stock.
CorporateGovernance and Commitment to Shareholders
Thecorporate governance and decisions are made by the board ofdirectors, which is responsible for the control of the firm (AmazonCorporate Relations, 2014a). The board is composed of directors ledby the CEO and independent members as required by Nasdaq. The boardnominates a corporate governance committee while independentdirectors appoint an independent lead director of the company as wellas other executive positions. In addition, the board has an advisorycommittee of retired members that counsels the company (AmazonCorporate Relations, 2014a). Moreover, non-employee directors holdshares in the company as a way of strengthening loyalty and decisionmaking processes.
Ina 1997 letter to shareholders, the governance of Amazon communicatedits fundamental dedication to create success for its shareholders buyincreasing their value (Amazon Corporate Relations, 2014b). Thiscommitment was just after two years of operation in the market. Thecompany has followed its commitment to this day by focusing itsattention on long-term value. According to Amazon Corporate Relations(2014), the company targets to give shareholders the best value byworking on five major areas. First, the company’s focus is oncustomers. Additionally, Amazon makes bold decisions on long-terminvestments instead of short-term profitability. Decisions are basedon strong leadership considerations, such as acquisitions and marketexpansion. Moreover, Amazon maintains proper cash and accounting.Finally, Amazon maintains lean cost culture and maintains hardworkingand prudent workforce (Amazon Corporate Relations, 2014b).
PublicDomain News and Market Trends
Thecompany has attracted positive news items and public speculation overthe recent past. The firm is introducing new products that will putit into market positioning that will guarantee expanded incomes forthe internet eCommerce giant. According to Sisario (2014), Amazon isalmost through on its plans to start a new revolutionary service ofstreaming music live. In addition, Amazon acquired a United Kingdombook seller company to diversify its market globally (PR Newswire,2014). This means the company is diversifying at a rate that fits themarket as a leader in products and services.
Accordingto Dorsey (2011), investors should be guided by the general markettrends of the industry they are interested in investing in. Theindustry of ecommerce is highly growing as the world shifts theattention to online shopping and purchasing products from trustedinternet companies. Based on the trust and industry command thatAmazon has, the future for the company is bright enough for a growthin sales, market expansion and globalization.
Currently,Amazon sells products to online shoppers from all over the world on adaily basis (Amazon, 2014). Despite the positive trends and excellentmarket positioning of the company, Amazon faces a growing competitionfrom other eCommerce giants. Among the main global competitors areeBay, an American internet company and Alibaba, a Chinese eCommercefirm. However, the company still remains a strategic ad a performingcompany to base the future of the market on. In regard to this fact,the investment in the Amazon Inc as a company would be a worthwhileconsideration.
Fromthe analysis of Amazon, it is clear that the company’s performanceand position are stable and favors investment. The financialperformance of the company has been increasing for the last fiveyears. The financial position of the company indicates a growingstability in its asset base. The management of the company continuesto express commitment to expansion and increased earnings for thebenefits of the investor. The market trends, public news recordspositive growth of the company and introduction of new services toglobal community. Finally, the company’s stock has a steady pricethat supports investor confidence. Therefore, it is worth investingin the company.
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