The Incredibly Growing Amazon

The Incredibly Growing Amazon

Amazon (NASDAQ: AMZN) keeps growing and growing despite bad news.

For example, Stockrow estimates Amazon achieved a revenue growth rate of 23.69% in the quarter ending on 30 September 2019. Consequently, Amazon reported quarterly revenues of $69.981 billion up from $63.404 billion on 30 June 2019.

Amazon’s revenue growth rate in the previous quarter was 19.89%. However, Amazon’s revenue growth rate is down from the 29.33% reported on 30 September 2018. In contrast, Amazon reported quarterly revenues of $56.576 billion on 30 September 2018.

Amazon loses JEDI

Thus Amazon is growing like a weed despite such setbacks as the JEDI contract loss. To elaborate JEDI is the $10 billion Joint Enterprise Defense Infrastructure cloud-infrastructure contract the US Department of Defense awarded to Microsoft (NASDAQ: MSFT) on 25 October 2019.

JEDI is a cloud that will serve the United States military, The Verge reports. However, $10 billion is a drop in the bucket for the company with $69.981 billion in quarterly revenues.

For instance, I estimate Amazon’s revenues grew by $16.58 billion without JEDI last quarter. Hence, the JEDI loss is a minor setback for the Everything Store.

Amazon Pay Supports Utility Bills

The Everything Store’s expansion of Amazon Pay could be far more lucrative than JEDI. Notably, Amazon Pay is expanding beyond the e-commerce platform.

Some Amazon customers can pay utility bills using Amazon Pay with the help of fintech firm Paymentus’s Instant Payment Network (IPN), MarketWatch reports. Amazon claims customers in 95% of US ZIP codes could pay utility bills with Amazon Pay by 2020.

Paymentus is a privately held fintech company that operates a bill pay service for PayPal (NASDAQ: PYPL). The fintech market growing fast, Stockrow reports PayPal’s revenues grew by 18.87% in the quarter ending on 30 September 2019.

I think utility bill payment through Amazon Pay and Alexa is a smart move. To explain, the payments will get real people used to paying on Amazon.

Amazon is expanding its financial services operations. I think that expansion will attract the attention of regulators. In particular, many people will ask if Amazon Pay is violating banking laws by offering something that looks like a bank account.

How Much Money is Amazon Making?

In particular, Amazon reported a quarterly gross profit of $28.679 billion; without JEDI or utility bills, on 30 September 2019. That gross profit grew from $27.067 billion on 30 June 2019 and $23.573 billion in September 2018.

In addition, Amazon reported a quarterly operating income of $3.157 billion and a net income of $2.134 billion on 30 September 2019. Interestingly, the operating income grew from $3.084 billion on 30 June 2019. However, the net income fell from $2.625 billion on June 30, 2019.

Moreover, the operating cash flow fell from $9.118 billion on 30 June 2019 to $7.892 billion on 30 June 2019. In addition, the free cash flow fell from $6.475 billion on 30 June 2019 to $4.507 billion on 30 September 2019.

Amazon is an Incredibly Cash-Rich Company 

Therefore, Amazon is generating more revenue and less cash from its business. However, Amazon had more cash in the last quarter.

To explain, I estimate Amazon had $43.401 billion in cash and short-term investments on 30 September 2019. In detail, Stockrow reports Amazon had $23.255 billion in cash and equivalents and $20.146 billion short-term investments at the end of last quarter.

In contrast, Amazon had $41.463 billion in cash and short-term investments on 30 June 2019. In detail, Amazon had $22.616 billion in cash and equivalents and $18.847 billion in short-term investments on 30 June 2019.

Thus, Amazon is still a cash-rich company and that cash stash is growing.

Amazon could be a great dividend stock

Therefore, I think Amazon (NASDAQ: AMZN) could pay a juicy dividend – if Jeff Bezos wants.

Famously, Amazon pays no dividend, but Jeff Bezos could soon have a strong incentive to change that policy. To explain, Amazon shares lost $19.45; or $1.09%, of their value on 25 October 2019. Analysts blame a mixed earnings report and the JEDI contract loss for that drop.

Consequently, Markets Insider estimates Amazon lost $40.5 billion in market value on 25 October 2019. Markets Insider claims Amazon’s Market Capitalization fell from $880.9 billion on 24 October to $840.4 billion on 25 October 2019.

The Market Cap drop caused Bezos to lose his status as the world’s richest person briefly Friday, The Observer claims. To clarify, The Observer estimates Bezos’ fortune fell by $9 billion because Amazon shares briefly fell below $1,700 to $1,696.58 at 9:30 A.M on 25 October 2019.

However, Bezos recovered the number one spot because Amazon shares closed at $1,7161.33 on that day. On 28 October 2019, Fortune estimated Bezos net worth at $110.3 billion. Bezos’ fortune fell because most of his consist of Amazon stock.

Jeff is the world’s richest man again because Amazon shares rose to $1,770.21 on 28 October 2019.

How Jeff Bezos could Profit from An Amazon Dividend

I think Bezos could increase Amazon’s stock price; and his fortune, by paying a dividend. Jeff could profit from an Amazon dividend in two ways.

First, Bezos’ stock could be worth more because investors could pay more for a dividend-paying Amazon. Second, Bezos himself could receive dividends from AMZN.

Thus, Bezos has a strong incentive to have Amazon pay a dividend. However; like Warren Buffett, Bezos dislikes dividends.

Plus, cash from a dividend is only icing on the cake for Jeff. Remember, Bezos has more money than he could ever spend without a dividend.

Amazon Stock is Too Expensive for Ordinary Investors

In the final analysis, I conclude we will not see an Amazon dividend soon. Thus, I consider Amazon a great growth stock that Mr. Market grossly overprices.

 

Hence, nothing about Amazon stock has really changed. I think investors need to stay away from Amazon (NASDAQ: AMZN) until its price drops below $1,000.

 

However, I doubt we’ll see such an Amazon price under $1,000 soon because Mr. Market loves Amazon. In fact, Mr. Market was paying $1,771.21 for AMZN on 28 October 2019.

 

Amazon stock is still too expensive for ordinary investors, despite recent setbacks at the company. The incredible growth makes Amazon too expensive for most investors.

 

Originally published at https://marketmadhouse.com on October 28, 2019.

 

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