Amazon (AMZN) is still a money machine. In fact, Amazon (NASDAQ: AMZN) had an incredibly lucrative 2021.
For example, Amazon’s quarterly gross profit rose from $46.271 billion on 31 December 2020 to $54.577 billion on 31 December 2021. Similarly, Amazon’s quarterly revenues grew from $125.555 billion on 31 December 2020 to $137.412 billion a year later.
Interestingly, Amazon did not report a quarterly operating income on 31 December 2021. However, Amazon’s quarterly operating income fell from $6.873 billion on 31 December 2020 to $4.852 billion on 30 September 2021.
So yes, Amazon enjoyed a wonderful 2021. Jeff Bezos’ departure did not reduce Amazon’s moneymaking capacity.
How Much Cash is Amazon Generating?
On the other hand, Amazon Inc. (AMZN) is generating less cash. For example, Amazon’s quarterly operating cash flow fell from $30.431 billion on 31 December 2020 to $22.086 billion on 31 December 2021.
Notably, Amazon did not report a quarterly ending cash flow on 31 December 2021. Instead, Amazon reported a negative quarterly ending cash flow of -$10.49 billion on 30 September 2021. Furthermore, the quarterly ending cash flow fell from $12.175 billion on 31 December 2021 and $34.155 billion on 31 March 2021.
Impressively, Amazon’s cash and short-term investments grew from $84.653 billion on 31 December 2020 to $96.049 billion on 31 December 2021. Hence, Amazon is accumulating more cash.
Conversely, Amazon is accumulating more debt. In detail, Amazon’s total debt grew from $100.504 billion on 31 December 2020 to $116.395 billion on 31 December 2021.
Amazon can off that debt. It reported a quarterly financing cash flow of -$3.1 billion on 31 December 2021. Hence, Amazon paid off $3.1 billion in debt in the fourth quarter of 2021.
What Value Does Amazon Offer?
Amazon (AMZN) added enormous value in 2021. The total assets grew from $321.195 billion on 31 December 2020 to $420.59 billion on 31 December 2021.
Hence, Amazon added $99.354 billion in total assets in 2021. That means Amazon is still growing despite the drop in income. In fact, Stockrow estimates Amazon’s revenues grew by 9.44% in the quarter ending on 31 December 2021.
Is Amazon’s Growth Slowing?
The statistics show Amazon’s growth is slowing. Stockrow estimates Amazon’s revenues grew by 43.59% in the quarter ending on 31 December 2021. Consequently, many people will wonder if Amazon has reached the limits of its growth.
History, however, shows Amazon is capable of enormous growth. For example, the number of Amazon Prime subscribers worldwide grew by 50 million in 2020. To elaborate, Statista estimates worldwide Prime subscriptions grew from 150 million in 2019 to 200 million in 2020.
Amazon’s long-term growth potential could be greater. For instance, Statista estimates Amazon had million Prime subscribers worldwide in 2015.
Amazon’s Enormous Platform
I think the key value of Amazon is its ability to dominate markets through a gigantic platform.
For example, Amazon Web Services (AWS) controlled 32% of the cloud infrastructure services market in the third quarter of 2021, Statista estimates. Microsoft’s (MSFT) Azure was the second largest cloud infrastructure service provider with 21% of the market in the third quarter of 2021.
Similarly, Amazon controlled 41% of the US retail ecommerce market in October 2021, Statista estimates. The next largest competitor was Walmart (WMT) which controlled just 6.6% of the US ecommerce market in October 2021.
Hence, Amazon dominates the markets for two very different services. Amazon can dominate cloud infrastructure services and American ecommerce at the same time.
Similarly, I think Amazon’s logistics capabilities could soon rival AWS in value. For example, The New York Times estimates Amazon had 175,000 delivery vans on the road in the United States at the end of 2021.
Amazon takes to the Air
Meanwhile, Amazon Air is trying to buy 10 Airbus A330-300 cargo aircraft for its fleet, Bloomberg claims.
In addition, Amazon Air trying to buy some Boeing 777-300ERSF aircraft for its fleet. Bloomberg speculates Amazon wants 777s because converted 777s could carry 25% more cargo than Boeing 747s.
Amazon Air’s current fleet comprises 75 planes. Converted Boeing 767s and 737s comprise the current Amazon Air fleet, Bloomberg estimates. Amazon Air was making 164 cargo flights a day in August 2021, up from 80 in May 2020, Bloomberg estimates.
Importantly, Amazon opened a $1.5 billion 800,000 billion air cargo hug at the Cincinnati/Northern Kentucky International Airport in August 2021. The air cargo hub allows Amazon to transfer cargo between airports fast. Amazon also charters international air flights to haul goods across the Pacific between the US and China.
Is Amazon Stock really worth $3,233.79 a share?
Amazon (AMZN) has enormous value, but investors will wonder if Amazon is worth the $3,223.79 Mr. Market paid for it on 9 February 2022.
My answer is no, because Amazon does not pay a dividend. I think Amazon is an incredible company, but it is worth around $1,000 a share. Unfortunately, investors will pay a premium for nothing but growth at Amazon.
Conversely, I note investors give Amazon no reason to pay a dividend. Why should Amazon pay a dividend when people pay $3,233.79 a share? Until investors wise up and stop paying two or three times what Amazon is worth for its stock, there will be no dividend.
Amazon is still a wonderful company and an incredible money maker that Mr. Market overprices. I advise investors to avoid Amazon (AMZN) until it offers a dividend or a realistic share price.
Originally published at https://marketmadhouse.com on February 9, 2022.
