Blyth Technology Software Group

Investment Thesis The market’s underlying fear of another tech bubble has caused them to overlook Amazon’s ability to successfully integrate and profit from their various business strategies, including #AmazonCart, HBO live-streaming and cloud services, which we believe will prove to be long-term drivers of growth and shield the company from direct competition in their retail business. The recent Nasdaq downturn has made it a more worthy bargain.

Company Overview u  World’s largest online retailer; accounts for 2%

of global retail sales

u  Products include : Books, video and MP3 streaming, video games, electronics, apparel and furniture, as well as cloud computing services.

u  Two main segments : North America and International.

u  Competitors : Best Buy, Walmart, Target, Staples and Barnes & Noble in the retail market; eBay and Zulily in the e-commerce market; Google, Netflix and Hulu in the video-streaming market; Google, Cisco, Microsoft and IBM in the web services market.

Ticker: AMZN

Current Price: $313.78

Market Cap: $143B

52-week range: 258.34-408.06

EPS: 0.64

Recent Financial History

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Management Team u  CEO & Chairman of Board (1994) : Jeff Bezos

§  Founder of Amazon in 1994

§  Named Businessperson of The Year 2012 by Fortune

u  CTO & VP : Werner Vogels

§  Expert in ultra-scalable systems and Dynamo, Amazon’s storage engine

§  Architect behind Amazon Web Services

§  Names Top 10 Cloud Influencers and Thought Leaders by Wired

u  SVP, Amazon Web Services (2006) : Andrew Jassy

§  Instrumental behind AWS’s tremendous growth since 2006

u  SVP, Consumer Business (2012) : Jeffrey Wilke

§  Prior experience SVP of North American Retail and Worldwide Operations

u  SVP, Seller Services (2007) : Sebastian Gunnigham

§  Prior experience as SVP at Oracle and VP of Enterprise Sales at Apple

NASDAQ

Recent Stock Performance

Recent News u  3/13/2014 : Prime membership price raised to $99 due to higher use

of Prime two-day shipping and increased cost of fuel and transportation.

u  3/27/2014 : Prices for cloud computing services cut by 30%, one day after rival Google did the same.

u  4/2/2014 : Fire TV launched at $99, free trial for Prime members. Product sold out within one week.

u  4/23/2014 : Deal with HBO to stream iconic shows on Prime Video announced.

u  5/5/2014 : #AmazonCart feature on Twitter launched at both US and United Kingdom.

u  5/19/2014 : Bezos announces plan to increase robot workforce to 10,000 by year end.

u  5/22/2014 : Amazon starts streaming HBO contents to Prime users.

Revenue Breakdown

Amazon’s Strategy u  Reinvest close to all of its profits and focusing on long-term growth.

u  Increase number of warehouses around the world to deliver products

more quickly.

u  Improve efficiency of services. For example, increasing the number of

robot workers to accelerate order fulfillment.

u  Undertake projects in different areas, such as implementing a drone-

delivery system and developing its own smartphones.

u  Expand Amazon Web Services (AWS) using its already present core

technology infrastructure.

Online Retail Market

u  Online retail sales projected to grow at annual rate of 10%. By 2017, the web will account for 10% of U.S. retail sales.

Social Shopping Trend u  Increasing percentage of consumers using social media to

u  Hear about other consumers’ experiences (70%)

u  Learn more about brands, products and services (65%)

u  Compliment brands (53%)

u  Social survey amongst teenagers found that

u  Respondents like buying an item after viewing it on a social media network (85%)

u  They would like the ability to purchase it directly from the network (47%)

u  A quarter of respondents already made purchases directly from the network (26%)

#AmazonCart u  Unveiled partnership with Twitter on May 5, 2014.

u  Users are able to place orders through Twitter using the

hashtag #AmazonCart

u  Amazon responds to tweets by adding the items to the

users’ cart, pending checkout

u  Users access Amazon to finalize the purchase.

Video Streaming Market

Video Streaming Business u  Signed deal with HBO on 23rd April 2014.

u  Ensures Amazon’s competitiveness against Netflix, Hulu or YouTube.

u  Shows were made available starting 21st May 2014, including

Boardwalk Empire, Six Feet Under, True Blood, and Too Big To Fail.

u  Recently obtained streaming rights to 24.

u  Company claims to have passed Hulu and Apple TV in streaming video

usage.

u  HBO GO likely to be offered on Fire TV by the end of 2014.

Cloud Services Market

Cloud Services Business u  Estimated revenue of $3 billion last year

u  Leveraged its economies of scale to buy and operate more gear and

bandwidth at lower prices, allowing it to undercut rivals.

u  Business is 5x larger than the next 14 competitors combined.

Customers include GE, BP, Pinterest and Flipboard.

u  Received provisional security authorization from US DOD, giving more

government agencies the ability to use the service.

Comps Model

DCF

Recommendation u  Time horizon : 2 Years

u  Price target : $372

Questions?