This month, e-commerce giant Amazon (AMZN) reported the biggest Prime Day event in the company’s history, which is expected to boost its top line. However, given its dismal state, would it make sense to invest in the stock? Read on to find out….
Amazon.com, Inc. ,AMZN) is a renowned e-commerce giant with presence in the global market. The company operates through its three broad segments of North America; international; and Amazon Web Services (AWS).
It was reported that AMZN Prime members purchased over 300 million items worldwide during Prime Day 2022, making it the event of the year the largest in the history of the company, Worldwide, Prime customers purchased over 100,000 items per minute, with US Prime members purchasing over 60,000 items per minute. The best-selling categories around the world were Amazon Devices, Consumer Electronics, and Home.
AMZN shares have gained 13.9% in the last one month and 1.1% in intraday. However, the stock is down 32.6% over the past year and closed its last trading session 26.7% year-over-year at $122.28.
Here are the factors that could affect AMZN’s performance in the near term:
bleak bottom line
For the second quarter of the fiscal year ended June 30, AMZN’s total net sales increased 7.2% year-over-year to $121.23 billion. On the other hand, its operating income declined 56.9% from the prior-year quarter to $3.32 billion. Net income and EPS declined 126.1% and 126.3% from the same period last year to a negative $2.03 billion and a negative $0.20.
In terms of its forward non-GAAP P/E, AMZN is trading at 303.00x, 2,388.4% higher than the industry average of 12.18x. The stock’s forward EV/EBIT multiple of 82.34 is 595.7% higher than the industry average of 11.84. In further context price/bookIt is trading at 7.48x, which is 216.6% higher than the industry average of 2.36x.
narrow profit margin
AMZN’s trailing-12-month EBIT margin and net income margin of 4.17% and 4.48% are 52.9% and 31.9% below their respective industry averages of 8.85% and 6.58%. Its previous-12 month ROTC and ROA of 5.13% and 5.21% are 28.1% and 5.5% lower than their respective industry averages of 7.13% and 5.52%. However, AMZN’s 12-month ROE is 18.05%, which is 7.9% higher than the industry average of 16.73%.
Power ratings reflect bleak prospects
AMZN’s power rating Reflect on this bleak outlook. The stock has an overall rating of D, which is equivalent to sell in our proprietary rating system. The POWR rating is calculated by considering 118 different factors, each factor weighted to an optimum degree.
AMZN has a growth grade of D in the last reported quarter, in line with its bleak bottom-line growth. The stock also has a D grade for value, which is in line with its high valuation.
65-in stock Internet Industry, it is ranked #35. The industry has been given F status.
click here To view additional power ratings for AMZN (Momentum, Stability, Sentiment and Quality).
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This year’s spectacular Prime Day can strengthen the company’s top line. However, AMZN is currently battling bottom-line losses, and its low profitability is concerning. Furthermore, with analysts expecting a decline in AMZN’s EPS for the current year, I think the stock may be avoided for now.
Amazon.com, Inc. How does (AMZN) Stack up against your teammates?
Shares of AMZN were trading at $135.81 per share Friday morning, up $13.53 (+11.06%). Year-over-year, AMZN is down -18.54%, while the benchmark S&P 500 index has gained -13.29% during the same period.
About the author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of macroeconomic changes on financial markets inspired her to pursue a career in investment research.