AMZN Financial Analysis

Analysis Date: 2/6/2025

Business Model

Amazon's revenue model is diversified across several segments including online stores, physical stores, third-party seller services, advertising services, subscription services, and cloud computing (AWS).

Revenue Sources

• Online Stores: Sales of products and digital media content through online platforms.
• Physical Stores: Sales from physical retail stores.
• Third-Party Seller Services: Commissions, fulfillment, and shipping fees from third-party sellers.
• Advertising Services: Revenue from advertising services to sellers, vendors, publishers, and authors.
• Subscription Services: Revenue from Amazon Prime memberships, digital video, audiobook, digital music, e-book, and other non-AWS subscription services.
• AWS: Revenue from cloud computing services.
• Other: Includes healthcare services, certain licensing and distribution of video content, shipping services, and co-branded credit card agreements.

Income Statement Analysis

• Operating Income increased significantly by 60.52% from Q4 2023 to Q4 2024, a pro.
• Net Income saw a substantial increase of 88.30% compared to the previous year, a strong pro.
• Basic Earnings per Share also grew by 84.47%, indicating improved profitability on a per-share basis, a pro.

Balance Sheet Analysis

• Total Assets increased by 18.38%, indicating company growth, a pro.
• Total Stockholders' Equity increased significantly by 41.65%, a strong pro, suggesting increased ownership value.
• Total Liabilities increased by 6.62%, a smaller percentage increase than assets and equity, suggesting healthy leverage management, a pro.

Cash Flow Analysis

• Net cash provided by operating activities increased by 7.47%, indicating a steady increase in cash generation from core operations, a pro.
• Net cash used in investing activities significantly increased, primarily due to increased purchases of property and equipment, which could be for long-term growth, a potential con in short term but pro in long term if investments yield returns.
• Net cash used in financing activities decreased by 51%, which could be due to less debt repayment or changes in financing structure, needs further investigation to determine if pro or con.
• Cash and cash equivalents at the end of the period increased by 11.40%, indicating a stronger cash position, a pro.

Capital Allocation

Amazon's capital allocation strategy appears to be focused on reinvestment in the business, particularly in property and equipment, as seen in the increased investing cash flow. The company does not distribute dividends and there is no mention of share repurchases in the earnings release. The focus is on long-term growth through business expansion and innovation, especially in AWS and infrastructure.

Management Commentary

The holiday shopping season was the most successful yet for Amazon.

Remarkable innovation delivered across all of our businesses, none more so than in AWS.

Delivered at its fastest speeds ever for Prime members in 2024.

First Quarter 2025 Guidance: Operating income is expected to be between $14.0 billion and $18.0 billion, compared with $15.3 billion in first quarter 2024, indicating a potentially flat to moderate increase in operating income in the next quarter.

Overall Sentiment: Positive. Management expresses confidence in the company's performance and highlights strong innovation and customer engagement. While Q1 2025 operating income guidance suggests moderate growth compared to the large increases seen in Q4 2024, the overall tone is optimistic about future prospects and continued growth.

Recommendation

Rating: Buy

Reason for Rating: Amazon demonstrates strong financial performance in Q4 2024 with significant increases in operating income, net income, and EPS. The balance sheet shows healthy growth in assets and equity. The company's diversified revenue streams and leadership in cloud computing (AWS) provide a solid foundation for future growth. Management commentary is positive, highlighting successful holiday season and ongoing innovation. Despite increased investment activities impacting investing cash flow, the strong operating cash flow and overall financial health support a Buy recommendation.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/6/2025, 11:25:43 PM