Quick Summary

Amazon is an online e-commerce marketplace and services provider. Its largest segment by revenue are online products and digital media (50% of sales), which include Amazon-sourced products, self-branded digital devices (like Alexa or Kindle), and consumer-focused online services (like Amazon Music and Amazon Video). Third-party seller services make up 19% of revenue, and include commissions, fulfillment, and shipping fees paid by other retailers to sell through Amazon's platform. Amazon Web Services (AWS - 13%) offers a cloud computing infrastructure for businesses, including compute, database, storage, and many other services. AWS is by far the company's most profitable segment, driving over 60% of operating profits. Amazon's Prime membership subscription service accounts for 7% of sales and provides customers with improved shipping options and access to many digital services. Whole Foods, a chain of organic food grocery stores purchased in 2017, accounts for 6% of sales. Lastly, advertising services through Amazon search are 5% of revenue. While Amazon is dominant in North America, it also has a meaningful 30% of (non-AWS) revenue from outside the U.S.

Does The Company Have Recurring And/Or Rising Revenues?

YES. Even at over $280 billion in revenue, Amazon continues to grow impressively, with a 3 year rate of 27%. Amazon still has great growth prospects. It is a dominant player in several enormous growth markets, including e-commerce (16% growth rate, $3.5 trillion dollars), and cloud services (16% growth, $270 billion). Given its excellent competitive position and aggressive stance towards expansion, we don't see growth as an issue. Amazon also has an excellent base of essentially recurring revenue. AWS and Prime are true structural recurring revenue models, we consider ad platforms to be recurring sales, and its marketplace is so large, has such a wide variety of items, and offers such great customer service, that we consider sales through it to also be frequent enough to consider recurring.

Does The Company Have Durable Competitive Advantages?

YES. What moat factor doesn't Amazon have? Its dominance of consumer shopping behavior makes it a go-to destination that third party sellers absolutely must consider when selling or advertising products, giving it a strong NETWORK EFFECT. It has spent decades building out a best-in-class fulfillment and delivery network, offering shipping terms few competitors can ever hope to match, providing a clear ECONOMIES OF SCALE cost advantage. It has an unparalleled collection of customer product reviews, making it a key research destination on products, and providing a UNIQUE ASSET advantage. Its laser focus on customer service, including a generous return policy and rapid, cheap shipping, give it a stellar reputation amongst customers and earn it a CONSUMER BRAND advantage as the default choice for online shopping. Finally, AWS offers absolutely critical baseline infrastructure for running an online business to countless large organizations, including Netflix, Facebook, and ESPN! Moving key systems to a competing provider would be disruptive and risky, giving Amazon yet another moat factor in HIGH SWITCHING COSTS. It's quite rare to see such a dominant company in any industry.

GreenDot Rating: GREEN

If Amazon isn't a GREEN (highly attractive) business, than these ratings are not worth much! This is one of the greatest companies of this generation. The dominant position it has carved out in 2 gigantic growth markets (49% of the U.S. e-commerce market and 33% in cloud infrastructure) is incredibly impressive. It has no less than FIVE strong moat factors across its businesses. Virtually all of its sales come from recurring sources. It is still led by its founder, Jeff Bezos, undeniably one of the greatest businessmen in history. It is constantly and aggressively trying to expand into new markets, most recently digital advertising, another giant opportunity. The Amazon doubters have been silenced over the years. There's no reason to think the company won't continue winning into the future.