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EXXON AND AMAZONDele Dina, Frank Graham, Hyun Sik Kim, Katrina Damschroder,
Layan Barghouthi, Hassan Haider
Agenda● Short Term Investment Criteria
o Justificationo Outlook
● Long Term Investment Criteriao Justificationo Outlook
Our RecommendationsShort-Term● Amazon (AMZN)● Buy for the year,
reevaluate at the end of the period
● Must be willing to take risk
Long-Term● Exxon Mobil (XOM)● Buy and hold, ride out
oil price volatility● Long term prospects in
alternatives will also improve company standing forward
Amazon- Short Term● Currently Trading (4/20) at $389.51● Analyst Estimate of $400.00 (Analyst
Median)● EPSxP/E Price: N/A*● 2014 Revenue: 88.99B● Profit Margin: -.27%● ROE: -2.35%● ROA: .24%
Amazon● Amazon consistently records a loss.
o *This, in turn, prevents us from calculating P/E, so it is difficult to come to an appropriate share price without a proper valuation model.
● However, despite this lack of profitability, Amazon’s stock has performed exceptionally well.
● No dividend declared or paid
Amazon Point and Figure Chart
Amazon Candlestick Chart
Amazon
Amazon Analyst Estimates
EPS Trends Current Qtr.Mar 15
Next Qtr.Jun 15
Current YearDec 15
Next YearDec 16
Current Estimate -0.12 -0.16 0.41 2.30
7 Days Ago -0.12 -0.17 0.40 2.27
30 Days Ago -0.12 -0.17 0.43 2.27
60 Days Ago -0.12 -0.17 0.42 2.28
90 Days Ago 0.18 0.01 0.82 3.23
Amazon- Outlook● Amazon has made consistent investments in
expanding and improving their business model.
● As such, some of these benefits should be realized in the next year
● Additionally, Amazon has an array of services lined up for release in the near future, which may help increase revenue and NOI.
Amazon- Outlook
● Operating margin expansion should continue to benefit from the shipping loss moderation
● Normalization of the international growth rate● Amazon Web Services (AWS) may generate several billion dollars in
revenue and prove to be the fastest-growing piece of Amazon’s business
● Recent approval of drone shipment technology● In the investment period, summer shopping season, back to school,
and holiday season should be strong times for sales and growth● Expansion of services across the Amazon platform
Exxon- Long Term● Trading at $86.93● P/E x EPS= $87.02● Slightly undervalued, room for growth● On a downward slide, opportune time to buy
in● Median target at $92.00
Exxon
Approximately 7% ROA Approximately 19% ROE Approximately 9% Profit Margin Strong capital management and effective
cost controls 2014 Revenue: 369.43B
Exxon● 95% of revenue is tied to oil operations
o Short term volatility is a risk, but long term stability and price increase will bolster revenues
● Expanded investments in alternative energy and drilling locations
● $.69 per share dividend- regular cash flow through duration of investment
Exxon● Oil prices are expected to hover in the $50 to
$70 range through the next two years● Increase from recent volatility will help
generate revenue● Historically strong performer with regular
dividend payments● Expansion of non-oil operations
Exxon - Point & Figure
Exxon Candlestick Graph
Exxon
Exxon Mobil Analyst Estimates
EPS Trends Current Qtr.Mar 15
Next Qtr.Jun 15
Current YearDec 15
Next YearDec 16
Current Estimate 0.82 0.81 3.74 5.25
7 Days Ago 0.84 0.84 3.78 5.31
30 Days Ago 0.82 0.84 3.79 5.35
60 Days Ago 0.77 0.81 3.67 5.32
90 Days Ago 1.09 1.10 4.88 6.21
Exxon and Oil Prices● Per barrel extraction cost: $12.72
(Bloomberg)● Any price above this level allows Exxon to
cover their production cost
Exxon- Outlook
● Investments in the Arctic, the ultra-deep sea, & the oil sands of Canada
● Anadarko Petroleum is considering selling its multi-billion dollar stake in Mozambique's giant gas reserves, Exxon is leading contender
● Lubricants for wind, nuclear, and geothermal energy sources that enhance efficiency
● Consistently strong and effective in managing capital and maintaining financial flexibility
Month AMZN (87 shares)
XOM(389
shares)
Relative Strength
1 33,843 33,843 1.00
2 33,060 33,454 0.98
3 32,799 33,065 0.99
4 32,103 35,010 0.92
5 28,014 33,454 0.84
6 27,492 35,010 0.78
7 27,492 36,177 0.75
8 26,448 35,339 0.75
9 33,495 35,788 0.94
10 28,275 37,344 0.76
11 29,496 38,511 0.77
Questions