To The Moon

$Amazon.com(AMZN)$

Amazon is a leading online retailer and cloud platform operator via Amazon Web Services (AWS). AMZN has both an online and physical presence in the retail space, supporting both its own direct sales as well as third-party retailers across a diverse range of product categories. The company also manufactures its own range electronic devices for sale, including the popular Kindle, Fire tablet, Echo, and Ring. Its subscription service, Amazon Prime, boasts over 200 million subscribers, and offers free two-day shipping and access to the company's video streaming platform.

Investment Overview

Long runway for growth in eCommerce & Cloud Computing. Amazon is still in the early stages of the secular growth cycle, with US e-commerce currently representing only ~13% of US retail sales, and with an estimated 15% of existing workload in the cloud. AMZN has moved early and is well-positioned in both segments, and currently has over 40% global market share in the cloud computing market through Amazon Web Services (AWS). Besides these two key drivers, AMZN has also developed other significant growth avenues including grocery, healthcare and Alexa/Echo. Even without undertaking further transformational acquisition opportunities, AMZN is expected to enjoy healthy double digit organic growth CAGR between 2021-2026.

Formidable infrastructure build-out to sustain future growth. AMZN has consistently made significant investments to deepen and widen its fulfillment capabilities. It has invested heavily in Amazon Prime Now, local DSPs and has doubled the capacity of its fulfilment centres within 2 short years, which are extremely valuable advantages in the current eCommerce landscape where supply chain bottlenecks, time constraints, and logistic limitations could prove very damaging to eCommerce players. For 2021, Amazon Logistics is estimated to ship ~66% of its own volume in the US (vs 42% in 2019). Amazon Logistics (AMZL) expects to be the largest package delivery carrier in the US by early 2022, which demonstrates the sheer size and speed of its buildout. This whopping capacity growth might even allow AMZL to potentially also provide third party logistics services in the US should they decide to do so in the future.

Virtuous organic growth cycle bolstered by economies of scale. The strength of the AMZN Logistics platform is a huge boost for AMZ's overall shipping efficiency, and helps AMZ reap cost savings by significantly lowering shipping and logistics costs. AWS and its advertising segments are also likely to provide sizeable income boost as these businesses continue scaling up at higher profit margins. Its strong balance sheet and USD36bn cash balance (as at Dec 2021) allows it to continue to grow and invest in improving its retail, cloud, and logistics platforms.

Risks

Increasing regulatory scrutiny and antitrust concerns continue to weigh. Intensified competition in e-commerce to slow market share gains. Rising labour and logistics costs could be more significant than expected and impact margins negatively.