Back to top

Analyst Blog

Amazon.com Inc. (AMZN - Analyst Report), the world’s largest online retailer has recently announced a public offering of bonds aggregating $3 billion. These bonds have been issued in three tranches of different amounts, with varying coupon rates and maturities.

The first tranch of $750 million carries a coupon rate of 0.65% and will mature in 2015. The second tranch of 1 billion, with a coupon rate of 1.2%, will mature in 5 years and the third portion of $1.25 billion carrying a coupon rate of 2.5% will mature in 10 years.

The 0.65% securities will yield 38 basis points more than similar securities in the market; the 1.2% securities will yield 63 basis points while the 2.5% notes will yield 93 basis points more than benchmarks.

Amazon stated that the transaction proceeds will be used for general corporate purposes and to fund a part of the $1.16 billion real-estate transaction.

Last month, Amazon had announced its intention to purchase its corporate headquarters in the South Lake Union neighborhood for $1.16 billion from Vulcan Inc., the investment firm of Microsoft co-founder Paul Allen. The company expects to complete the entire real estate transaction by the end of the fourth quarter.

Amazon is one of the leading players in the extremely fast-growing retail ecommerce market and its strength lies in its huge scale of offerings, its broad reach and platform approach. Amazon has limited debt and $5.25 billion in cash on its balance sheet.

We believe Amazon’s strong balance sheet helps the company to capitalize on investment opportunities and strategic acquisitions, thereby further improving growth visibility. Going forward, we believe the company will continue to experience strong growth.

However, at the same time, we think that there is a certain amount of uncertainty regarding Amazon’s investment plans, which could pressure earnings in the near term. In the recently reported third quarter, the company suffered a huge loss of 60 cents due to its investment focus. The company is making heavy investments in its Kindle tablet computers, new warehouse and data centers, which will continue to weigh on its near-term results.

Amazon currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

At the moment, however, most of Amazon’s competition (whether direct or indirect) continues to come from eBay Inc. (EBAY - Analyst Report) and Barnes & Noble, Inc. (BKS - Snapshot Report), which retain a Zacks #2 Rank equivalent to a short-term Buy rating, while Google , carries a Zacks #3 Rank (short-term Hold rating).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%