Was Amazon (NASDAQ:AMZN) A Penny Stock?

Amazon Inc (NASDAQ:AMZN, AMZN.US) has not only reaped healthy returns for its shareholders over the years, but with its ever-expanding strategy and strong fundamentals, it also continues to be an attractive option for future investors.

But was this tech behemoth, which was trading at a price of US$ 3206.22 on June 4, 2021, always such a big deal on the stock markets? Or was it ever a penny stock with a small market capitalization? Let’s find out here.

Source: Pixabay

Amazon’s (NASDAQ: AMZN, AMZN.US) Epic IPO

In its early days, Amazon operated as an online book store based out of Seattle, US. After its incorporation in 1994, the Jeff Bezos-led company announced on May 14, 1997, that its initial public offering (IPO) saw an offer of three million shares at a price of US$ 18 apiece.

Then functional Deutsche Morgan Grenfell Inc had acted as the lead manager of Amazon’s IPO, while US-based investment firms Alex. Brown & Sons Incorporated and Hambrecht & Quist were co-managers. Underwriters were also extended the over-allotment option to buy up to 450,000 additional Amazon shares.

Amazon, back then, described itself as an online book retailer that held over 2.5 million titles.

Following the IPO, reports had praised Amazon for reeling in total gross proceeds of some US$ 54 million, which gave the bookseller a market value of about US$ 438 million at that time. The IPO, reports pointed, had seen its share price rocket by about 30 per cent from its opening price.

Was Amazon Ever A Penny Stock?

Amazon stock underwent three splits between 1998 and 1999. The first one was a 2:1 stock split undertaken in June 1998, followed by another in 3:1 ratio in January 1999. The third stock split of 2:1 took place in September 1999, when its existing shareholders were reportedly awarded one additional share for each share held.

Amazon stock, following the third split, closed at about US$ 62.44 apiece on September 3, 1999, as per TMX.

Amazon shares were never quite a penny stock in the sense that its market cap has not been under the US$ 50 million-mark..

How is the stock performing presently?

One of the top technology players in the world, Amazon was trading at a price of US$ 3,179.44 apiece on Monday, June 7 (2.07PM EST). Its market capitalization currently hovers over US$ 1.6 trillion.

Amazon, the world’s largest companies, offers US$ 52.57 earnings per share and a price-to-earnings ratio of 61.50.

The company’s price-to-book ratio is 15.5, while its debt-to-equity ratio is 0.82, as per TMX.

Amazon, with its vast and diversified operations spread internationally, is continues to attract a massive number of investors, as reflected in its high trading volumes. Its 10-day average trading volume stands at about 2.6 million shares, while its one-month average share movement is nearly four million.

The e-commerce giant offers a 31.15 per cent return on equity.

Amazon’s Latest Financials

In the first fiscal quarter that ended on March 31, 2021, the e-commerce major saw a 44 percent year-over-year (YoY) increase in its net sales, amounting to US$ 108.5 billion.

Its net income during Q1 2021 jumped multifold YoY to US$ 8.1 billion, up from that of US$ 2.5 billion in Q1 2020. Its operating income also catapulted to touch US$ 8.9 billion in the latest quarter.

Amazon’s operating cash flow rose 69 per cent YoY in the first quarter of 2021 to touch US$ 67.2 billion. Its free cash flow, however, rose only slightly by about US$ 2 billion to reach US$ 26.4 billion in Q1 FY21.

As for its second quarter 2021 guidance, Amazon said that its net sales are likely to jump about 24 to 30 per cent, as it looked forward to benefitting from favorable foreign exchange rate changes going forward.

The company projected an operating income in the range of US$ 4.5 billion to US$ 8.0 billion in the second quarter of 2021, as against the US$ 5.8 billion it achieved in the corresponding period last year.

Amazon expects to record costs to the tune of US$ 1.5 billion as a result of COVID-19 in the second quarter, it said.

In a bid to expand its operations in the Middle East, the Seattle-based e-commerce company announced in May 2021 its plan to set up an infrastructure center in the United Arab Emirates by the second half of 2022. It said that it plans to include three “Availability Zones” for its UAE customers.

This infrastructure center would be the web services company’s second such center in the region, with the first one located in Bahrain.

The infrastructure center is expected to give Amazon customers greater choice and allow easier access to its advanced technological offerings.

This is in addition to the company’s recent launch of a fully-functional second region in Japan — the Amazon Web Services Asia Pacific (Osaka) Region — during the first quarter. This region also includes three availability zones.

Amazon currently has about 80 such availability zones across 25 geographies, the company said.

It plans to launch 18 more such infrastructure centers across geographies as a measure to broaden its global reach. These geographies include Australia, India, Indonesia, Spain, Switzerland and the United Arab Emirates.

As a measure to improve its operations further, Amazon also plans to hire about 75,000 employees in its fulfilment and logistics segment, across the US and Canada, it said in a statement released in May.

The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.

Comment


Disclaimer

   
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK