Judging by the financial results obtained in 2013, Amazon.com Inc. implemented successful financial management. The revenues grew by 13.4 billion USD in 2013 if compared to previous year. The company moved from a loss of $39 million in 2012 to a gain of $274 million in 2013. The revenues of the company more than doubled showing stable uptrend (Figure 1). As it can be seen from Figure 1, the financial management was not very successful in 2014 because one-year movement of stock is currently in the downtrend. However, one-month movement of stock shows uptrend raining hope for growth in the near future. At the present time, investing in Amazon.com is an opportunity to earn money because the stock is in the downtrend, but the company recommended itself as profitable and stable. Besides, Amazon.com follows the outlined strategy of market leader and actively reinvests in its business and it is committed to innovations. Therefore, the company can retain the interest of traders and investors by offering the opportunities to earn (Bloomberg Businessweek n.p.).
Shall (n.p.) recommend watching the trading activity of Amazon.com Inc. stock to make conclusions regarding further actions since 1.5 daily options of Amazon.com Inc. stocks were traded on 13th of November 2014. Probably, this recommendation resulted from significant fluctuations of stock during this week: from sharp fall to $290 it increased to $330. The previous close was $327.82 and the option traders predicted the increase of stock up to $345. Shall (n.p.) stated that a bullish tendency is apparent. Amazon.com is a company with a good reputation and many of the stockholders believe that the company can remain profitable in the next months. The problem was that the stocks did not have the potential for growth since they were already highly priced. Hence, Amazon did not offer any significant returns to its stockholders because it is a mature company. The traders believe that the company will start earn more profit as soon as it completes technology innovations (Shall n.p.).
Max (n.d.) stated that Amazon has significant hidden potential for growth since the company is constantly reinvesting in its business and does not trade more than annual growth volume of merchandise. It means that the sales volume is on the platform of Amazon showing good financial management of its assets.
Figure 1 Financial Statements of Amazon.com Inc. for 2010-2013
The financial performance of the company cannot be evaluated as the performance of other companies because of Amazon’s specialty. Non-GAAP measures are the most accurate indicators for this company.
There improvements are observed in cash flow conditioned by increase in operating income (Figure 1). The peak of operating income was observed in 2009-2012 when the revenue reached $395 million. The increase in net sales first started in 2009 from $24,509 billion to $61,093 in 2012. Capital expenditures had been increased as well showing focus on innovations and capital investments. However, a decrease in net income was observed in 2010 and further resulted in $39 million of loss in 2012. The second quarter of 2013 showed positive dynamics and net income grew up to $34 million reversing previous downtrend (Blomberg n.p.).
Amazon does not pay dividends preferring growth financing. The company enjoys small operating margin showing low profitability. Low operating margin can be explained by investments in cloud technologies announced in the news (Bloomber n.p.). Presently, the company finances growth representing declining net profit during the last three years. Amazon received increasing valuation of its shares despite the norms accepted by financial analysts. Amazon is sometimes seen as a non-profit, consumer-oriented organization. Therefore, its revenues are fluctuating. Currently, Amazon is operating in International and North American segments showing growth on both segments.
Despite Amazon cannot be evaluated highly according to the standard valuation methods, the company has certain perspectives for growth. As the shares of the company had recently decreased, there is an opportunity to invest in a premium company and get profit. The analysis of the news about Amazon showed that the company tends to invest and reinvest in innovations and further growth that is a good sign for its investors. Amazon is subject to stock fluctuations. These fluctuations are caused by the recent changes in economy and politics. Also, the company appears in the news regularly that means that it is popular among the traders and stockholders.
The Chief Executive Officer serves as a company’s director as well. The company’s management considers it appropriate. I think that combining the functions of CEO and a director is not appropriate because this person cannot manage to perform such a large volume of work at a time. A director should exercise an independent judgment when carrying the director’s responsibilities (Annual Report 71).
Amazon.com Inc. has strong mechanisms in selecting candidates to the Board. Corporate Governance Committee considers multiple aspects of qualifications of the candidates so a diversity of perspectives and experience is created. The main skills are commitment to the long-term interests of the company and satisfying the needs of shareowners. These values helped build strong organizational customer-oriented culture at Amazon. The lead director is elected for two years thus motivating him/her to do his/her best for the company (Amazon n.p.).
The executives at Amazon.com are average judging by the financial results obtained in 2012. However, the compensation to them is set above average. As a result, Board members are overpaid. For example, Mr. Wilke received $17.7 million in 2012 while the average compensation of executives working for other large corporations was about $10.8 million. (Annual Report 70; Amazon n.p.).
I would recommend investing in Amazon because of several reasons. The first reason is that this company has recommended itself as a stable and profitable market player. However, Amazon does not pay dividends. Therefore, the choice of Amazon’s shares should be conditioned by the strategy of potential investors. The second reason is that most probably the shares of the company will grow in the nearest future. These outcomes are drawn from the analysis of the financial statements and the recent news of the company. Investing in the shares of Amazon will be an excellent option for those investors pursuing the goal of obtaining quick profit because the experts predict fast growth during the next week. Most probably, the reaction of the market on buying large options of shares will be buying as well that will cause the price increase. Price increase, in its turn will reduce the demand for shares thus decreasing the price back to the average monthly price of the stock (Bloomberg n.p.).
Works Cited
Amazon. Corporate Governance. Nov. 2013. Web. 16 November 2014.
Annual Report. Amazon.com Inc. Jan. 2014. Web. 16 November 2014.
Bloomberg. Amazon.com Inc. Bloomberg. Nov. 2014. Web. 16 November 2014.
Bloomberg BusinessWeek. Amazon.com Inc. Bloomberg BusinessWeek, Nov. 2014. Web. 16
November 2014.
Max, Sarah. Big Ideas, Big Picture. Barron’s, Nov. 2014. Web. 16 November 2014.
Shall, Parke. Amazon on Watch After Options Activity. Seeking Alpha, Nov. 2014. Web. 16
Nov. 2014.
