Week 4 Shareholder Analysis Assignment Content 1

Wk 4 Shareholder Analysisassignment Content1 Continue Your Work W

Continue your work with Amazon, the company selected in Week 2. Research Amazon’s financial reports for 2017 and complete a 2- to 3-page FAQ/Shareholder Analysis. Evaluate the economic conditions that influence Amazon’s performance, considering political, environmental, currency (money), global economics, and government influences. Compare the market conditions with Amazon’s performance for 2017 and conclude how those market conditions, such as interest rates, Federal Reserve Bank monetary policy changes, or other relevant market factors, affected Amazon’s performance. Analyze the year-over-year performance from 2016 to 2017 by examining key financial metrics such as trailing PE ratio, forward PE ratio, price to book, return on assets, and return on equity, and incorporate supporting references formatted according to APA guidelines.

Paper For Above instruction

Introduction

The objective of this analysis is to evaluate Amazon’s financial performance in 2017, considering the broader economic and market conditions that influenced the company during that year. As one of the leading global e-commerce and cloud computing companies, Amazon’s financial outcomes are susceptible to various external factors, including macroeconomic trends, government policies, and global economic dynamics. This report will undertake a comprehensive review of Amazon’s financial reports for 2017, analyze pertinent economic influences, compare market conditions with the company's performance, and evaluate the year-over-year financial metrics from 2016 to 2017.

Amazon’s Financial Performance in 2017

In 2017, Amazon experienced significant revenue growth, reporting net sales of approximately $177.9 billion, a 31% increase over 2016 (Amazon.com, Inc., 2017). The company continued to expand its market presence in e-commerce and cloud computing, with Amazon Web Services (AWS) revenue comprising a substantial portion of its operating income. The company's net income for 2017 was roughly $3 billion, reflecting improvements in operational efficiency despite high investments in infrastructure and technology (Amazon, 2017). Key financial ratios such as the Price-to-Earnings (PE) ratio, Return on Assets (ROA), and Return on Equity (ROE) provide insight into its performance, with the trailing PE ratio at approximately 278, indicating high market expectations and growth prospects (Yahoo Finance, 2017).

Economic and Market Conditions Influencing Amazon in 2017

Several macroeconomic factors played a crucial role in shaping Amazon's 2017 performance. Globally, the economy experienced moderate growth, supported by stabilization in major markets, which bolstered consumer confidence and spending (World Bank, 2017). Politically, the United States saw pro-business policies under the Trump administration, including tax reforms aimed at boosting corporate investment (U.S. Congress, 2017). Environmental factors, while not directly impacting Amazon’s core operations, affected supply chain logistics, especially with increasing focus on sustainability. The currency markets also influenced Amazon’s international sales, as fluctuations in dollar strength affected pricing and profitability abroad.

The global economic environment was characterized by low-interest rates maintained by the Federal Reserve, which encouraged borrowing and investment. The Federal Reserve's monetary policy in 2017 kept interest rates in a range of 1.25-1.50%, fostering favorable borrowing conditions for companies like Amazon to finance expansion initiatives (Federal Reserve, 2017). These policies contributed to buoyant market conditions, with the stock market reaching record levels, which positively influenced Amazon’s share price and market capitalization.

Comparison of Market Conditions with Amazon’s Performance in 2017

The general market environment in 2017 was marked by robust economic growth, low-interest rates, and a bullish stock market, all conducive to Amazon’s expansion. The low-interest-rate policy decreased the cost of capital, enabling Amazon to invest heavily in technology, logistics, and infrastructure projects, which supported its revenue growth. Moreover, positive investor sentiment, driven by technological innovation and strong earnings reports, sustained high stock valuations, exemplified by Amazon’s high PE ratio.

Conversely, certain market risks, including potential inflationary pressures and geopolitical tensions, loomed but did not significantly dampen Amazon’s growth trajectory in 2017. The overall favorable market conditions underscored the company’s performance, reflected in increased revenue, improved margins, and elevated stock price. The environment was conducive to Amazon’s strategic investments, and the external economic factors played a pivotal role in its successful performance during the year.

Year-Over-Year Analysis: 2016 vs 2017

Analyzing Amazon’s financial metrics from 2016 to 2017 reveals significant improvements. The revenue increased from approximately $135.9 billion in 2016 to $177.9 billion in 2017, reflecting accelerated growth (Amazon.com, Inc., 2016; 2017). The PE ratio, a measure of market valuation, surged from about 104 in 2016 to roughly 278 in 2017, indicative of heightened investor confidence and expectations of continued growth (Yahoo Finance, 2017).

The Return on Assets (ROA) improved marginally from 3.4% in 2016 to 3.5% in 2017. Similarly, the Return on Equity (ROE) increased from 8.2% to 15.5%, illustrating enhanced profitability and efficient use of shareholders’ equity (Morningstar, 2017). The Price-to-Book (P/B) ratio also experienced an upward trend, reflecting the valuation premium attributed to Amazon’s rapid growth and market dominance.

This comparative analysis underscores the positive momentum in Amazon’s financial health and operational efficiency over the period, aided by favorable macroeconomic conditions and strategic investments. The increased revenue and profitability metrics align with the overall growth narrative supported by low-interest rates, supportive governmental policies, and a robust consumer market.

Conclusion

The year 2017 was a pivotal period for Amazon, characterized by substantial revenue growth and rising market valuation. External economic conditions, notably low-interest rates, a stable global economy, and anticipatory investor sentiment, played a critical role in bolstering the company’s performance. Amazon’s strategic investments and innovative expansion were well-supported by the prevailing market environment, allowing the company to capitalize on growth opportunities.

The analysis of year-over-year metrics from 2016 to 2017 reveals remarkable progress, driven by a combination of internal efficiency and external economic advantages. As Amazon continued its trajectory of expansion, understanding these macroeconomic factors is essential for stakeholders, investors, and policymakers to anticipate future performance trends. Overall, Amazon’s 2017 performance exemplifies how external economic conditions significantly influence corporate success in a globalized economy.

References

• Amazon.com, Inc. (2017). Annual Report 2017. Retrieved from https://www.amazon.com
• Amazon.com, Inc. (2016). Annual Report 2016. Retrieved from https://www.amazon.com
• Federal Reserve. (2017). FOMC Monetary Policy Statement. Retrieved from https://www.federalreserve.gov
• Morningstar. (2017). Amazon Inc. Financial Data. Retrieved from https://www.morningstar.com
• U.S. Congress. (2017). Tax Cuts and Jobs Act. Retrieved from https://www.congress.gov
• Yahoo Finance. (2017). Amazon Stock Data. Retrieved from https://finance.yahoo.com
• World Bank. (2017). Global Economic Prospects. Retrieved from https://www.worldbank.org
• U.S. Federal Reserve. (2017). Monetary Policy Report. Retrieved from https://www.federalreserve.gov
• International Monetary Fund. (2017). World Economic Outlook. Retrieved from https://www.imf.org
• Corporate Finance Institute. (2017). Key Financial Ratios. Retrieved from https://corporatefinanceinstitute.com