Amazon.com Inc

Amazon.com Inc (NASDAQ: AMZN) is an online retailer that also serves consumers through physical stores. It also manufactures and sell electronic devices, including Fire TV, Kindly, Fire tablet, among others. 

Investment Rationale – Hold at USD 3,052.03

• From a technical standpoint, 14-day RSI (44.73) seems favourable and supporting the upside potential.
• Over the past four years (FY16 to FY20), revenue has surged at a CAGR of 29.8%.
• The Company reported a remarkable top-line and bottom-line growth in FY20 and expected to continue the strong momentum in Q1 FY21 as well.
• Jeff Bezos will take up the role of Executive Chair in Q3 FY21, while Andy Jassy will take over the position of Chief Executive at that time, reflecting solid succession planning in the business.

Risk Assessments

• Amazon confronts intense competition across geographies, which can impact the margins.
• The international operations are exposed to economic and political risk, government regulations, credit risk and unfavourable foreign exchange movements.

Recent News

18 March 2021: The National Football League signed a 10-year agreement with Amazon for broadcasting 15 Thursday Night Football games along with one pre-season game annually on Prime Video in the United States.

Financial Highlights for the year ended 31 December 2020 (as 3 February 2021)

 (Source: Company Website)

• Net sales soared 38% year-on-year in FY20, while the operating income increased to US$22.9 billion.
• The operating cash flow increased 72%, from US$38.5 billion in FY19 to US$66.1 billion in FY20.
• The net income surged to US$21.3 billion in FY20, translating into US$41.83 per diluted share.
• As of 31 December 2020, total liquidity stood at US$84.4 billion, comprised of marketable securities, cash, and cash equivalents.

Share Price Chart    

 (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price/Cash Flow Approach (NTM) (Illustrative)

Conclusion

For Q1 FY21, net sales are projected to grow within the range of 33% to 40% on Q1 FY20, supported by the favourable exchange rates. Subsequently, operating income is anticipated to be between US$3.0 billion and US$6.5 billion, post assuming US$2.0 billion of Covid-19 related costs. Overall, Amazon demonstrated excellent growth in FY20 and expected to continue the strong momentum in FY21 as well. Therefore, the Company is well-positioned to create substantial value for its shareholders. Stock 52 week High and Low were USD 3,552.25 and USD 1,889.15, respectively.

Based on the strong fundamentals, solid guidance, and valuation conducted above, we have given an “Hold” stance on Amazon.com Inc at the closing price of USD 3,052.03 (as on 26 March 2021), while we look forward to reviewing that how things would unfold for the Amazon when Andy Jassy will take over the position of Chief Executive in Q3 FY21. 

Bionano Genomics Inc

Bionano Genomics Inc (NASDAQ: BNGO) is engaged in optical genome mapping for genome analysis. It also provides diagnostic testing services and provides tools & services through its Saphyr® system.

Investment Rationale – Expensive at USD 7.75

• From a technical standpoint, 20-day SMA (8.61) seems unfavourable and reflecting a downward trend in the stock.
• Since 2018, gross margin has remained below 32.6%, while the industry median is 60.3%. The other profitability of the Company has remained in the negative zone since its inception.
• BNGO is an early commercial-stage entity and has been incurring losses since it is formed, while there is no certainty regarding its ability to achieve profitability.
• The financial results can be adversely impacted further if the development and launch of new products are not successfully managed.

Risk Assessments

• The Company requires additional funding to support its growth objectives and other commercialisation efforts as clinical trials are quite expensive, and BNGO does not generate any profit.
• The Covid-19 pandemic can delay the clinical trials and regulatory approvals.

Recent News

25 January 2021: Bionano Genomics announced an underwritten public offering and raised nearly US$230 million in gross proceeds.

Financial Highlights for the year ended 31 December 2020 (as on 23 March 2021)

 (Source: Company Website)

• As of now, the Company only generated revenue from the sale of instruments and consumables for research use only.
• The net losses aggravated from US$29.8 million in FY19 to US$41.1 million in FY20.
• As a new Public Company, it witnessed an additional cost during the FY20.
• The Company has never paid dividend and even expects to retain future earnings for business development and expansion.
• As of now, the Company only generated revenue from the sale of instruments and consumables and related services for research use only.
• The net losses aggravated from US$29.8 million in FY19 to US$41.1 million in FY20.

One Year Share Price Chart      

(Source: Refinitiv, Thomson Reuters)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

As the Covid-19 pandemic resulted in limited lab operations and research activities, revenue decreased around 16% year-on-year in FY20. Subsequently, the losses were significantly worsened against the previous year. Moreover, the Company has been dependent upon the sales of common stock and equity instruments since the IPO for its liquidity. Therefore, its ability to attain liquidity from external sources would decide its growth prospects. Hence, it is prudent not to punt on this risky stock. Stock 52 week High and Low were USD 15.69 and USD 0.25, respectively.

Based on the weak fundamentals, heightened operational risk, uncertain market conditions, and valuation methodology, we have given an “Expensive” stance on Bionano Genomics Inc at the closing price of USD 7.75 (as on 26 March 2021), while we look forward to reviewing the stock when the Company has a better clarity over outlook and profitability. 

*All forecasted figures and Peer/Industry Information have been taken from Refinitiv, Thomson Reuters.

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