| | | Hi Top, I think you may have skipped a year? It was last trading at this level in June 2020.
The difference between then and now is a year and a half of growth. AWS continues to grow at a 30%+ annualized rate, and it just tipped over 30% margins! It is only a fraction of the net sales, but 60%+ of the segment earnings at this point.
Their retail operations have been a bit more volatile (the pandemic threw a blip into the numbers, creating a very tough comp this past quarter), but are also growing sales at 20%+ per year. Their international operations (which aren't noticeably profitable yet) are growing even faster, and are now roughly half the size of their North American operations.
Consider the NA segment income, add another 50% for the international segment (even if not yet profitable), add AWS, and the 2019 report comes to $20B of "potential" operating earnings (and actual $14.5B) and maybe $16B of "potential" net income (actual $11.5B). Figure growth of 20%. Apply a generous 40x multiple to that potential, and you get a market cap of $640B.
Calculated the same way, my estimate for 2022 comes to $35B, and growth is looking even more robust now than it did then -- as the rapidly growing AWS is dominating results. Now the same calculation suggests a market cap of $1.4T. So the way I analyze things, the company is at least twice as valuable today as it was two years ago. The share price has increased by a smaller factor. Which is why it was not in my comfort zone in early 2019 at $1700/share but it is today. I am now able to see a justification for those valuations.
Besides, consider what the rest of the market has done? I've owned NKE and HD in that sector over that span, large positions in each. NKE is up 43% since January 25, 2020. AMZN is up 50%. HD is up 55%.So it isn't like I really missed out on anything by waiting! The growth in AMZN fundamentals has surpassed what NKE and HD have done, but the share gains have been more muted.
I initiated AMZN on April 19, 2021. Not a perfect entry point, but I am confident that will pay off within five years. My purchase today ought to pay off within two. I'm happy with both. |
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