Amazon Jeffries 2019

Company Update
USA | Technology | Internet April 3, 2019
Amazon.com, Inc (AMZN) BUY
EQUITY RESEARCH AMERICAS

Price target $2,300.00
Deep Dive - Still Room to Run Price $1,813.98^
Key Takeaway
We have updated our SOTP analysis for AMZN and reiterate our Buy and 12-
month PT of $2,300. We continue to see 27% near-term upside from current
levels but longer-term we see a road map to $3,000+, supported by our SOTP. Financial Summary
We believe the stock remains undervalued, despite 21% appreciation YTD. In
Book Value (MM): $43,549.0
our view, many of its embedded growth opportunities are underappreciated
and the optionality from new initiatives is not reflected in the stock. Net Debt (MM): ($16,698.0)
Cash/Share: $82.34
Key takes from our deep dive:
Our updated SOTP analysis, based on 2022E revenue, suggests ~65% upside to 5 Yr. Rev. CAGR: 16.9%
■
potential value of $3,000 in 2 years. Market Data

This report is intended for Jefferies clients only. Unauthorized distribution is prohibited.
■ Our analysis is based on relatively conservative assumptions, particularly about growth

in Amazon's most profitable segments - AWS, Advertising, 3P Seller Services. 52 Week Range: $2,050.50 - $1,307.00
Total Entprs. Value: $872.2B
We believe AMZN has just scratched the surface in many of its existing markets and
■
Market Cap.: $888.9B
upside would be driven by further success across the board but primarily in 3 areas:
• AMZN’s core retail business which, despite notable deceleration going fwd, Shares Out. (MM): 490.0
remains a primary beneficiary of secular growth in eCommerce, growing 1.5-2x Float (MM): 411.9
faster than the industry, driven by Prime and best-in-class fulfillment capabilities; Avg. Daily Vol.: 4,348,703
• AWS (17% of '22E Rev but 34% of projected AMZN value), the de facto standard
for public Cloud, driving overall revenue growth and margin accretion, with
additional LT opportunities in SaaS and on-prem / hybrid Cloud;
• Fast-growing, emerging businesses such as advertising, which not only expand
AMZN’s TAM but also drive margin improvement.
■ Advertising, AWS, and 3P Seller Services are all growing faster than the core retail Brent Thill *
biz (2018-22E CAGR of 38%, 30%, 20% vs. 13%, respectively) and are more profitable Equity Analyst
• We estimate these 3 businesses will be on a combined ~$194B run rate by 2022, (415) 229-1559 bthill@jefferies.com
Brian Fitzgerald *
accounting for 44% of total revenue but 66% of AMZN's value;
Equity Analyst
• We expect multiples for these high-recurring revenue / high-margin businesses to (212) 284-2491 bfitzgerald@jefferies.com
expand as investors recognize their embedded value. Stan Velikov, CFA *
Equity Associate
■ We think the stock is deeply undervalued at current levels (415) 229-1534 svelikov@jefferies.com
• Despite a slowdown in rev growth, we believe Street underappreciates many of John Byun *
AMZN's embedded growth opportunities and the optionality from new initiatives; Equity Analyst
• While the stock has held back since 4Q18 print on investor concerns about (415) 229-1558 jbyun@jefferies.com
John Streppa, CFA *
decelerating top line growth and step up in investments...
Equity Associate
• ...on a growth-adjusted basis the name continues to screen very favorably against (212) 738-5794 jstreppa@jefferies.com
Internet and retail peers, and we expect multiples to expand over time. * Jefferies LLC / Jefferies Research Services, LLC
USD Prev. 2017A Prev. 2018A Prev. 2019E Prev. 2020E
Price Performance
Rev. (MM) --177,866.0 --232,887.0 -- 274,541.2 -- 324,777.9
EV/Rev 4.9x 3.7x 3.2x 2.7x 2,200
EBITDA (MM) -- 20,014.0 -- 33,476.0 -- 42,153.2 -- 57,579.2

2,000
EV/EBITDA 43.6x 26.1x 20.7x 15.1x
EPS
1,800
Mar -- 1.48 -- 3.27 -- 5.19 -- --
Jun -- 0.40 -- 5.07 -- 5.73 -- -- 1,600
Sep -- 0.52 -- 5.75 -- 6.44 -- --

1,400
Dec -- 3.75 -- 6.04 -- 8.72 -- --
FY Dec -- 6.15 -- 20.14 -- 26.08 -- 42.31
1,200
FY P/E NM 90.1x 69.6x 42.9x APR-18 AUG-18 DEC-18 APR-19
^Prior trading day's closing price unless otherwise

noted.
Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 54 to 58 of this report.
AMZN
Company Update
April 3, 2019
This page left intentionally blank.

page 2 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com
Please see important disclosure information on pages 54 - 58 of this report.

This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. AMZN
Company Update
April 3, 2019
US Equity Research | April 2019
Internet & Interactive Entertainment

Brent Thill
bthill@Jefferies.com
415.229.1559
Brian FItzgerald
bfitzgerald@jefferies.com
Amazon Deep Dive: 212.284.2491
Sum of the Parts Suggests

Stan Velikov, CFA
svelikov@jefferies.com
415.229.1534
Upside to $3,000 by 2021 John Byun

jbyun@Jefferies.com
415.229.1558
John Streppa
jstreppa@jefferies.com
212.738.57947
Jefferies LLC

Company Update
April 3, 2019
Amazon – Potential for $3,000 Stock in 2 Years, ~65% Upside

 65% Stock Upside by 2021 – Our sum of the parts analysis suggests material upside for Amazon’s stock. Our
current $2,300 PT implies 27% upside over the next 12 months, but looking further out we see a road to $3,000 for
the stock (or ~65% upside).
 Core Drivers Include Further Success in Existing Businesses – Amazon has just scratched the surface in many
of its existing markets and we do not believe they need to open new storefronts to achieve our valuation. We
examined 6 of Amazon’s core businesses (AWS, core retail, 3P seller services, advertising, grocery, and subscription)
and applied mostly conservative / discounted multiples to each business. Our analysis is based on relatively
conservative growth expectations and does not include any upside from new businesses such as healthcare ($3T
market in the US), which could prove a break-out hit, or any other vertical Amazon could potentially disrupt.
 Why We Are Different – Advertising, AWS, and 3P Seller Services are all growing faster than the core and are more
profitable. We estimate conservatively these businesses will be on a combined ~$194B run rate by 2022 (vs. cons at
$220B+), accounting for ~44% of total revenue, but 66% of Amazon’s value. We have high confidence these high-
recurring revenue / high-margin businesses warrant higher multiples than the core business and expect investors to
recognize their embedded value.
 We Also Believe the Stock Offers More Upside from New Initiatives not Reflected in Current Stock
Price – We believe the stock remains undervalued given all embedded growth opportunities and the optionality
from new initiatives. We think Amazon trades at a material discount to peers on growth-adjusted basis and expect
multiples to expand over time.

Company Update
April 3, 2019
Amazon – We See Material Upside Despite Embedded Conservatism

Sum of the Parts (SOTP) analysis suggests ~65% upside to $3,000 by 2021
 We believe our SOTP analysis is fairly conservative – the multiples we use for Amazon’s biggest segments do not give the Co. full credit for
superior growth while, at the same time, our growth assumptions for Amazon’s most profitable segments are below current consensus
 Driven by Advertising, Prime and AWS, we believe AMZN’s market cap could approach $1.5T in 2 years
 …and this only includes the segments in which AMZN already has meaningful operations, excluding multi-billion dollar opportunities such
as healthcare as well as smart-home devices, home security, entertainment
 AMZN also has plenty of room for expansion in areas such as apparel, B2B, groceries, SaaS and other Cloud opportunities, which could
drive valuation even higher
Multiple 2022E Rev 2018-22 Firm Value Per % of

Segment Low High CAGR Low High Share Share Value
AWS 6.0x 8.0x 73,395,024 30% 440,370,144 587,160,193 $1,026.40 34%
Online Stores 1.0x 3.0x 197,981,668 13% 197,981,668 593,945,003 $791.05 26%
3P Seller Svcs 3.0x 5.0x 88,020,241 20% 264,060,722 440,101,203 $703.38 23%
Advertising 4.0x 5.0x 32,925,470 38% 131,701,880 164,627,351 $296.00 10%
Subscription Svcs 3.0x 5.0x 28,625,750 19% 85,877,250 143,128,750 $228.75 7%
Physical Stores 0.3x 0.6x 20,279,271 4% 6,083,781 12,167,562 $18.23 1%
Sum 441,227,423 1,126,075,445 1,941,130,061
Net Cash 16,384,000
Average
Equity Value 1,142,459,445 1,957,514,061 $1,549,986,753
Implied Share Price $2,258.27 $3,869.37 $3,064
Implied EV / '21 Revenue 2.6x 4.4x 3.5x
Source: Jefferies estimates

Company Update
April 3, 2019
Amazon – Fastest Growing Segments Are the Most Profitable

 Since Amazon does not break out Op Income by segment (except for AWS), we tried to estimate the profitability of its other segments by
looking at comparable businesses
 Online Stores (#1 by Rev) – operates near break-even now, especially with increased investment internationally, but we expect to see some margin
accretion over time as investment levels normalize and the business scales
 3P Seller Services (#2 by Rev) – is Amazon’s 3rd most profitable segment at 5-6% Op Inc margin but we think it has potential to go much higher as AMZN
leverages its fixed fulfillment infrastructure
 AWS (#3 by Rev) – is Amazon’s most profitable segment at 28% margin in ‘18 and we expect to see continued margin accretion as the business scales
 Physical Stores (#4 by Rev) – we think operates at ~3% (Whole Foods had 4-5% margin but AMZN has been investing aggressively since its acquisition);
we expect only minimal margin accretion over time given the competitive nature of the space
 Subscription Services (#5 by Rev) – mostly Amazon Prime for now, we believe is near break-even after accounting for fulfillment and content costs
associated with the service; however, we see potential for margin expansion over time as other services (Music, Video) scale
 Advertising (#6 by Rev) – we think runs at ~15% margin which is below direct comps like Google and Facebook but at much lower scale; we expect nice
margin accretion over time as advertisers appreciate its potential and the business scales
 We are highlighting that Amazon’s most profitable segments are growing the fastest
 This underscores the embedded potential for further upside to our $3,000 stock price level in 2 years
Amazon Segments
2018 2018 2018-22
Revenue ($B) GAAP Margin CAGR
Advertising 9.1 ~15% 38%

AWS 25.7 28% 30%
3P Seller Services 42.7 5-6% 20%
Subscription Services 14.2 ~1% 19%
Online Stores 123.0 0-1% 13%
Physical Stores 17.2 ~3% 4%
Source: Company reports, Jefferies estimates

Company Update
April 3, 2019
Amazon – New Initiatives Present Further Upside

 Health care presents a good example of the upside embedded in new opportunities
 The space is quite big – over $3T overall with retail product sales exceeding $440B
 Realistically Amazon would not participate in all verticals (somewhat limiting the TAM)
 Regulatory and operating requirements in many of the verticals introduce big hurdles and costs
 But we expect Amazon to play a meaningful role in some of them – including Rx and OTC meds, medical supplies and equipment – which
combined represent a meaningful opportunity (in excess of $500B)
 Amazon’s PillPack acquisition in June 2018 signals the Co.’s strong interest in Rx drugs
 …and recent additions to state Rx licenses at its AZ facility indicate continued execution on mgmt’s strategy
 Amazon also continues expanding its private label OTC healthcare product line (Basic Care) growing SKU count 43% M/M in March ‘19
 Assuming a modest 5-10% market share in 3 years yields $25-50B in sales which represents an incremental 5-10% growth to our GMV
estimate of $500B by 2022

Company Update
April 3, 2019
Amazon – What’s the TAM of the World?!?

 Big market opportunity ($45T+) with expanding boundaries
 …and the Co. has just scratched the surface in verticals such as healthcare ($3T market), apparel ($3T market), B2B ($1T market), and
groceries ($800B market)
eCommerce: $4T
Media &
Online Opportunities
Entertainment (US):
$771B
IaaS: $67B Restaurant Delivery: $30B
Smart speaker: $13B

Online Apparel: Online Furniture: Online Auto
PaaS: $23B $167B $26B Parts: $11B Online Grocery: $10B
Logistics: $15T Global Retail: $27T

Physical Opportunities
Theatrical & Home

Entertainment: $88B
Trucking: $725B US Grocery: $780B
Book stores/publishing :
$25B
Parcel Delivery: $300B Global Apparel: $3T US Restaurant: $540B
Source: Gartner, Global Market Insights, PWC, IBSWorld, eMarketer, Frost & Sullivan, AAP
Accenture, TMR, US Dept of Commerce, ITA, Euromonitor, McKinsey & Co., Hedges & Co.

Company Update
April 3, 2019
Amazon – Top Large Cap Internet Stock with Plenty of Upside

 AMZN ($2,300 PT, 27% upside), top Large Cap name under coverage, is up 21% YTD (vs. NASDAQ +18%)
 It has outperformed the market in the last 4 years and in 8 of the last 10
 Underperformance in 2011 and 2014 was driven by investment cycle fears
 The stock has returned +32%, +203%, and +430% over a 1-, 3-, and 5-year period vs. +14%, +60%, and +84% for NASDAQ
 However, the name continues to screen very favorably against Internet and Retail peers on growth-adjusted basis, trading at
 EV/EBITDA to Growth of 0.61 vs. Large Cap Internet avg of 1.80 / Retail avg of 2.69
 EV/Sales to Growth of 0.16 vs. Large Cap Internet avg of 0.82 / Retail avg of 0.49
AMZN Stock Performance vs. NASDAQ

200%
150%
100%
50%
0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD
-50%
AMZN NASDAQ
Source: FactSet, Jefferies

Company Update
April 3, 2019
AWS

Company Update
April 3, 2019
AWS – Revenue Growth Engine and Margin Booster

A look at a broad set of publicly-traded Cloud comps yields a conservative value for AWS in the $500B+ range
 Applying growth-adjusted Revenue and EBITDA multiples in line with the avg for the comps below gets us to valuation in excess of $1.1T
 $1.1T = $73.4B in ‘22 Rev @ 16x (0.59 EV/Rev to Growth X 27% 2019-22 Rev CAGR)
 With a more conservative approach – applying a 30% and 50% discount, respectively, to the growth-adjusted avg Revenue and EBITDA
multiples for comps growing in excess of 10% – we get a valuation for AWS of $500B+
2018-21 2018-21
Stock Market Enterprise Revenue EV/Revenue Multiple Revenue EV/Rev EBITDA EV/EBITDA Multiple EBITDA EV/EBITDA
Price Cap Value CY19 CY20 CY19 CY20 CAGR to Growth CY19 CY20 CY19 CY20 CAGR to Growth
Microsoft Corporation $119.19 $914,451 $857,124 $117,314 $130,608 7.3x 6.6x 12% 0.55 $49,095 $56,305 17.5x 15.2x 16% 0.97
Alphabet Inc. Class A $1,205.54 $838,196 $737,035 $163,326 $192,153 4.5x 3.8x 18% 0.22 $59,079 $68,469 12.5x 10.8x 17% 0.63
Alibaba Group Holding Ltd. Sponsored ADR $181.74 $467,423 $449,064 $70,936 $93,960 6.3x 4.8x 32% 0.15 $20,709 $26,576 21.7x 16.9x 27% 0.62
Oracle Corporation $54.15 $185,066 $199,641 $39,795 $40,910 5.0x 4.9x 2% 2.43 $18,738 $19,268 10.7x 10.4x 2% 4.37
International Business Machines Corporation $143.00 $127,251 $159,392 $77,991 $78,400 2.0x 2.0x 0% n/m $18,584 $18,962 8.6x 8.4x 0% n/m
SAP SE Sponsored ADR $115.81 $138,236 $150,664 $30,794 $33,230 4.9x 4.5x 9% 0.53 $9,579 $10,934 15.7x 13.8x 11% 1.30
salesforce.com, inc. $160.51 $123,753 $119,397 $15,805 $18,908 7.6x 6.3x 20% 0.31 $3,707 $4,500 32.2x 26.5x 24% 1.09
VMware, Inc. Class A $185.05 $75,952 $71,826 $9,945 $10,912 7.2x 6.6x 10% 0.64 $3,796 $4,155 18.9x 17.3x 9% 1.98
ServiceNow, Inc. $246.82 $44,551 $43,071 $3,428 $4,400 12.6x 9.8x 29% 0.34 $925 $1,241 46.6x 34.7x 34% 1.03
Red Hat, Inc. $183.10 $32,365 $29,437 $3,787 $4,397 7.8x 6.7x 15% 0.44 $1,008 $1,177 29.2x 25.0x 15% 1.64
Zendesk, Inc. $86.27 $9,348 $9,301 $803 $1,040 11.6x 8.9x 30% 0.30 $56 $105 165.0x 88.3x 60% 1.47
Teradata Corporation $43.75 $5,147 $4,802 $2,034 $2,081 2.4x 2.3x -1% n/m $379 $462 12.7x 10.4x 16% 0.64
Mean $246,812 $235,896 $44,663 $50,917 6.6x 5.6x 15% 0.59 $15,471 $17,679 32.6x 23.1x 19% 1.43
Median $125,502 $135,030 $23,300 $26,069 6.8x 5.6x 14% 0.39 $6,687 $7,717 18.2x 16.1x 16% 1.09
Avg for 10%+ Growers $353,710 $329,207 $56,701 $66,614 7.1x 6.0x 18% 0.37 $12,289 $14,547 38.5x 26.1x 22% 1.04
Revenue ($M) EBITDA ($M)

EV/Revenue CY21E CY22E CY23E EV/EBITDA CY21E CY22E CY23E
Multiple $59,190 $73,395 $89,542 Multiple $33,222 $41,122 $50,080
5.5x $325,542 $403,673 $492,481 11.0x $365,445 $452,345 $550,876

5.0x $295,948 $366,975 $447,710 12.0x $398,668 $493,467 $600,956
6.5x $384,732 $477,068 $582,023 13.0x $431,890 $534,589 $651,035
7.0x $414,327 $513,765 $626,794 14.0x $465,112 $575,712 $701,115
7.5x $443,922 $550,463 $671,564 15.0x $498,335 $616,834 $751,194
8.0x $473,516 $587,160 $716,335 16.0x $531,557 $657,956 $801,274
8.5x $503,111 $623,858 $761,106 17.0x $564,779 $699,079 $851,354
page 11 of 58 Source: FactSet, Jefferies estimates Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Company Update
April 3, 2019

AWS is Amazon’s Cloud computing business which has become the de facto standard for public Cloud, with largest
customer base and broadest set of use cases
AWS Revenue and Adj EBITDA ($B)  Launched in 2006, AWS has been revenue growth and profitability
80 driver for AMZN for over a decade now
70
73.4  Its first-mover advantage (roughly 5-year head start) has allowed
60 AWS to garner close to 25% market share (higher in IaaS)
59.2
50  AWS has delivered ~53% revenue CAGR over the past 4 years and
40 47.0 we expect will generate 30% CAGR over the next 4
41.1
30 35.9
33.2
20 25.7 26.5  The level of innovation at AWS is unprecedented – every year AWS
17.5
20.3 releases over one thousand new services and features (1,017 in
10
12.2
7.2 9.9
14.5 2016, 1,430 in 2017, and 800 in 1H18)
0
2016 2017 2018 2019E 2020E 2021E 2022E Number of New AWS Services and Features by Year
1,430
Revenue Adj EBITDA
1,017
 AWS has a global footprint that keeps expanding – it offers over 125 800
fully-featured Cloud services from 61 Availability Zones across 20 722
geographic regions in the US, Australia, Brazil, Canada, China,
France, Germany, India, Ireland, Japan, Korea, Singapore, and the UK 516
 12 new Availability Zones across 4 AWS regions (Bahrain, South

280
Africa, Hong Kong, SAR, and Italy) have been announced for launch
159
by 1H of 2020 61 82
24 48
 We believe the global AWS opportunity is a revenue growth engine
with corresponding margin accretion to the overall business 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H18
Source: Company reports

Company Update
April 3, 2019

AWS is the runaway market leader with 2x the size of the next 5 closest competitors combined (by revenue), running
multiple times more compute capacity than the rest of the industry
 Sticky, highly recurring revenue stream, more profitable than  Best in class financials: 45%+ rev growth, ~30% op margin
the rest of AMZN (~30% operating margin vs 5-6% for overall biz)  …and we expect AWS to grow to ~$90B business in 5 years
 AWS is 11% of Amazon’s total revenue but ~60% of Op Inc
 This would be ~75% the size of MSFT and >2x the size of ORCL at
 Standout referenceability – customers include Netflix, GE, current levels
Capital One, Salesforce, AirBnB, Workday, Expedia, Comcast,  To reach a similar size, Azure would have to grow at a 55% 5-yr
Adobe, and Intuit CAGR and Google Cloud would have to grow at ~90%
 Our industry conversations indicate AWS has ~80% share of
 Even at these levels, we project AWS will still represent <20% of
public Cloud implementations
AMZN’s total revenue (est. ~$509B in FY23)
AWS Revenue and Operating Margin
34%
80 34%
33%
70 31% $73B 32%
60
30%
30%
28% $59B
50
28%
$47B
40
25%
26%
25%
30 $36B
24%
20 $26B
$17B 22%
10
$12B
0 20%
2016 2017 2018 2019E 2020E 2021E 2022E
Revenue Op Inc Margin

page 13 of 58 Source: Company reports, Jefferies estimates Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Company Update
April 3, 2019

Revenue and market share trends among the Top 3 IaaS vendors
6%
Public Cloud Market Share
$59B 8% 10% 12% 15% 18%
18%
22%
$47B 25%
27%
27%
26%
$36B
$28B
$26B
$21B 76%
$17B $19B 70%
$16B 65% 61% 59% 56%
$12B $12B
$10B
$6B $7B
$3B$1B $2B $4B
2016 2017 2018 2019E 2020E 2021E 2016 2017 2018 2019E 2020E 2021E
AWS MSFT Azure GCP AWS MSFT Azure GCP

Source: Company reports, Jefferies estimates Source: Company reports, Jefferies estimates
 The Cloud pie keeps expanding (Gartner forecasts 17% Y/Y growth in ‘19) and the majors keep taking market share from marginal players
 Gartner's latest IaaS Magic Quadrant review listed only 6 providers that matter - AWS, Azure, GCP, Alibaba Cloud, Oracle, and IBM -
down from 14 a year ago
 AWS enjoys a 5-year head start and continues with its robust growth but Azure and GCP are showing faster growth (off a smaller base)
 Microsoft Azure is currently on a ~$10B run rate and offers unique hybrid capabilities and strong compatibility with other Microsoft
systems and technologies; most compliance certifications of any Cloud
 Google Cloud Platform, at ~$4B run rate but less enterprise expertise than AWS/Azure, is still ramping up and expanding its feature set

Company Update
April 3, 2019

What’s next for AWS? We think given the company’s demonstrated success in the infrastructure layer, AWS’ next
move could be towards the larger $100B+ SaaS market; on-prem is another big opportunity for AWS
 AWS could effectively double its Cloud market opportunity, adding the $100B+ SaaS market to the $100B+ combined IaaS / PaaS market
 We think initial efforts could be more vertically-focused, with options in education, healthcare, government presenting attractive opportunities
 In the next 3 years, we conservatively assume AWS will grow to $59B in annual revenue (using 32% CAGR vs. 47% Y/Y growth in 2018)
Enterprise
Microsoft Azure
AWS
Midsize
SMB
Google Cloud
Infrastructure Platform Applications
Source: Company reports
 Where we could be wrong

─ Market penetration – AWS is already operating at a run rate ($29B) that is more than ½ the est 2018 Cloud IaaS / PaaS market ($46B)
─ Competitive pressure from Microsoft Azure on the higher end and GCP on the lower end, could impact AWS’ revenue growth
─ Margin trajectory remains a key question, as Amazon continues to invest internally, keeping EBITDA margins in the low double digits, and
pricing pressure from the competition could offset any margin uplift from increasing adoption of premium services

Company Update
April 3, 2019
Core Retail

Company Update
April 3, 2019
Core Retail – Top Beneficiary of Secular eCommerce Growth

A look at a broad set of publicly-traded Retail comps yields a value for Amazon’s Core Retail business of ~$400B
 Applying a growth-adjusted GMV multiple in line with the avg for the comps below (ex outliers), we get a valuation in excess of $1.3T
 $1.3T = $502B in ‘22 GMV @ 2.7x (0.19 EV/Rev to Growth X 14% 2019-22 GMV CAGR)
 With a more conservative approach – not giving AMZN any credit for its superior growth profile and just applying the avg multiple
excluding outliers – we get a valuation for Amazon’s Core Retail business of ~$400B
2018-21
Stock Market Enterprise Revenue/GMV EV/Rev Multiple Rev EV/Rev
Price Cap Value CY19 CY20 CY19 CY20 CAGR to Growth
JD.com, Inc. Sponsored ADR Class $30.29

A $36,469 $39,976 $212,608 $250,283 0.2x 0.2x 17% 0.01
Wayfair, Inc. Class A $149.39 $13,610 $13,680 $9,114 $11,702 1.5x 1.2x 29% 0.04
Zalando SE $40.26 $9,980 $9,126 $10,277 $12,481 0.9x 0.7x 18% 0.04
Walmart Inc. $96.94 $278,187 $324,653 $526,623 $544,835 0.6x 0.6x 3% 0.19
Costco Wholesale Corp $240.50 $105,791 $104,918 $155,562 $166,506 0.7x 0.6x 7% 0.09
Target Corporation $79.46 $41,028 $51,464 $77,470 $79,950 0.7x 0.6x 3% 0.22
Dollar General Corporation $117.89 $30,595 $33,221 $27,301 $29,245 1.2x 1.1x 7% 0.16
Dollar Tree, Inc. $104.11 $24,799 $27,831 $23,603 $24,645 1.2x 1.1x 4% 0.27
Best Buy Co., Inc. $71.45 $19,135 $18,698 $43,454 $44,062 0.4x 0.4x 1% 0.32
Kohl's Corporation $70.87 $11,564 $13,260 $19,347 $19,505 0.7x 0.7x 0% 2.85
Macy's Inc $24.67 $7,586 $10,660 $25,096 $25,086 0.4x 0.4x 0% 3.03
Nordstrom, Inc. $43.94 $6,811 $8,662 $16,055 $16,398 0.5x 0.5x 2% 0.26
Williams-Sonoma, Inc. $57.64 $4,543 $4,464 $5,723 $5,849 0.8x 0.8x 2% 0.33
J. C. Penney Company, Inc. $1.45 $459 $3,987 $11,460 $11,425 0.3x 0.3x 0% n/m
TJX Companies Inc $53.08 $65,688 $60,781 $41,322 $43,822 1.5x 1.4x 6% 0.23
Ross Stores, Inc. $93.76 $34,746 $33,085 $15,899 $16,882 2.1x 2.0x 6% 0.30
Mean $43,187 $47,404 $76,307 $81,417 0.9x 0.8x 7% 0.56

Median $21,967 $23,264 $24,349 $24,866 0.7x 0.7x 4% 0.23
Avg ex-outliers (KSS, M, JCP) $49,250 $54,098 $87,523 $93,659 0.9x 0.8x 8% 0.19
GMV ($M) Revenue ($M)

EV/GMV CY21E CY22E CY23E EV/Revenue CY21E CY22E CY23E
Multiple $446,074 $502,366 $557,296 Multiple $173,593 $197,982 $224,604
0.5x $223,037 $251,183 $278,648 1.4x $243,031 $277,174 $314,446

0.6x $267,644 $301,420 $334,377 1.6x $277,749 $316,771 $359,367
0.7x $312,252 $351,657 $390,107 1.8x $312,468 $356,367 $404,288
0.8x $356,859 $401,893 $445,837 2.0x $347,187 $395,963 $449,209
0.9x $401,466 $452,130 $501,566 2.2x $381,905 $435,560 $494,130
1.0x $446,074 $502,366 $557,296 2.4x $416,624 $475,156 $539,051
1.1x $490,681 $552,603 $613,025 2.6x $451,343 $514,752 $583,972
page 17 of 58 Source: FactSet, Jefferies estimates Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Company Update
April 3, 2019

AMZN has been the undisputed leader in eCommerce, taking market share from offline and online competitors alike
and creating tremendous value for shareholders (~3x more price appreciation than WMT and ~23x more than JCP in
5 years)
AMZN Retail Index (XRT)
600
500
400
300
200
100
Source: FactSet
Amazon Global GMV and Revenue ($B)

 In the early years, AMZN focused on market penetration, through low
prices and broad selection, but later shifted its attention to 550
500
convenience, the third major pillar of a successful eCommerce strategy 450 502
446
 Today, about 1/2 of digital shoppers in the US start their product searches 400
350 391
on Amazon.com 370
300 339
322
 Free shipping, membership programs such as Prime, Pantry and Fresh, 250 288 278
239
and an assortment of expedited shipping options (such as free 2-day, 200
231
207
150 182
same-day, 1-hour) meet diverse consumer needs / preferences and create 100
160
124
convenience for shoppers 50
0
 AMZN’s ability to reduce friction for shoppers has helped deliver 16% 2016 2017 2018 2019E 2020E 2021E 2022E
revenue CAGR in its core retail business over the past 4 years and is
GMV (ex-WF) Revenue (ex-AWS)
expected to generate 13% CAGR b/n ’18 and ‘22

Company Update
April 3, 2019

In the US alone, total Retail sales have exceeded $5.3T and eCommerce is roughly 10% of that… or $512B in 2018
and growing at a 2018-22 CAGR of 13% (~3x faster than total retail)
US eCommerce Sales ($B)

Amazon US GMV ($B) and Market Share (%)
Series7 eCommerce Y/Y Growth eCommerce Penetration Total Retail Y/Y Growth
$900 20%
900 90%
822
$800 18%
800 734 80%
15.6%
16%
$700
14.5% 14.4% 14.2%
700 652 70%
14.0%
13.3% 14% 580
$600
12.3%
12.6% 600 60%
13.2% 513
12%
12.4%
$500 12.0% 500 449 50%
11.4% 40% 40% 41% 41%
9.6%
10% 388 38%
10.5%
8.8% 400 33% 337 40%
$400 8.0%
8%
29% 300
7.2%
300 264 30%
$300
6.4% 230
6% 196
5.0%
4.7% 200 148 20%
$200 3.9% 3.8% 4.0% 4.0% 111
3.3% 4%
2.5% 100 10%
1.9%
$100 2%
0 0%
$0 0%
2016 2017 2018 2019E 2020E 2021E 2022E
2014A 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E
US Retail eCommerce AMZN US GMV AMZN Market Share

Source: US Census Bureau, Jefferies estimates
Source: Company reports, US Census Bureau, Jefferies estimates
 Price and selection remain key growth drivers but now  Amazon keeps growing GMV more than 1.5x faster than
convenience and higher service levels are becoming major the market, taking market share from smaller players
differentiators
 By reducing/eliminating friction in the purchase experience
 Consumers are increasingly expecting free / discounted (through expedited fulfillment, free / easy returns, etc) the
shipping and shorter delivery times => same-day shipping Co. is gaining consumers’ trust and making its website the
has become the new two-day shipping first place shoppers check when doing a product search
 Mobile and tech improvements (discovery, trust & safety,

payment utilities, etc.) are accelerating the migration online

Company Update
April 3, 2019

Free shipping is taken for granted today and expedited shipping is becoming increasingly important to consumers
 Free shipping seems to have settled at ~63% of eCommerce  Categories shifting to mobile are experiencing the strongest
transactions growth (jewelry, video games, toys / hobbies)
 Remains the most important factor for consumers  However, mobile screen real estate is limited and a few winners
shopping online get disproportionate share of engagement
 …but importance of fast shipping has been increasing over
time (one of many reasons AMZN has been doing so well)  the number of installed retail mobile apps on users’ phones are
coming down (55% of users had 3 or fewer apps in Apr’17 vs.
50% a year earlier)
Free Shipping Penetration in eCommerce Transactions
 AMZN’s app continues to have a significant home screen
advantage – materially ahead of competition
 1/3 of users with only 1 retail app on phone have AMZN
Source: comScore, Jefferies

Company Update
April 3, 2019

While already ~40% of total Digital Commerce (2018), mCommerce continues growing much faster than
eCommerce and brick-and-mortar retail
US mCommerce Sales ($B)  According to eMarketer, US mCommerce grew +32% Y/Y in

$600 160%
2018 vs. +15% for eCommerce and +5% for discretionary retail
Series7 mCommerce Y/Y Growth mCommerce Penetration
 Despite this material growth differential, mobile dollars are still

140%
$500 significantly lagging mobile’s share of digital media time spent –
120%
this highlights the current conversion challenges for mobile and
$400
the future growth opportunity
100%
$300 80%
61.8%
57.1%
60%
51.9%
$200
46.3%
41.6% 40.9% 40.4%
38.2%
35.9% 40%
34.9%
$100 32.4%
29.2% 29.8%
25.8% 24.0%
20%
23.7%
21.3%
19.1%
$0 0%
2014A 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E
Source: eMarketer, Jefferies
 We estimate US mobile Commerce grew 32% in 2018 to

$207B (includes sales from tablets but excludes travel and event ticket
sales) to reach 40% of US eCommerce sales (that’s just 3.9% of
total retail sales); We expect continued growth to ~$508B in 2022
(25% 4-year CAGR) Source: comScore
 Consumers are leveraging sophisticated mobile apps to compare prices and get real-time inventory (both local & online). This empowers
the consumer, opening up the whole ‘Price   Availability’ Continuum, and effectively greases the traditional supply / demand
curves in tandem, making the whole commerce process that much more efficient

Company Update
April 3, 2019

Today, eCommerce is roughly 12% of total retail worldwide (up from 4% in 2012) and keeps growing at a CAGR of
~20% (2017-2022), roughly 4x faster than overall retail
Retail eCommerce Sales by Region ($B)
6,000
 eCommerce penetration is highest in China (~22%) and the
developed world but still less than 15% overall in APAC and less 5,000
than 10% in North America and Western Europe
4,000
 Emerging markets are the least penetrated (<5%) and expected
3,000
to grow the fastest (~18% avg CAGR 2017-22)
2,000
 Everywhere one thing seems for granted – eCommerce is
expected to grow much (3-4x) faster than total retail 1,000
0
Retail eCommerce Sales Growth by Region
2016 2017 2018E 2019E 2020E 2021E 2022E
40% Asia-Pacific North America Western Europe

Latin America Central & Eastern Europe Middle East & Africa
Source: eMarketer, Jefferies

30%
20%
Retail eCommerce Sales Growth by Region
2018E 2017-22 CAGR

10% Asia-Pacific 30% 25%
Middle East & Africa 23% 20%
Central & Eastern Europe 21% 17%
0%
2016 2017 2018E 2019E 2020E 2021E 2022E
North America 17% 15%
Latin America 15% 11%
Asia-Pacific North America Western Europe
Western Europe 13% 9%
Central & Eastern Europe Latin America Middle East & Africa
Source: eMarketer, Jefferies Source: eMarketer, Jefferies


Company Update
April 3, 2019

Robust eCommerce growth has impacted negatively offline retail but some major players are re-gaining traction
 About 7K store closures were announced in the US in 2017 and Retail Store Closures Announced (by Year)
some household names closed their physical doors for good – 8,000
including Radio Shack, Toys’R’Us, The Limited, hhgregg
7,000
 Brick-and-mortars have fared much better in 2018, some reporting
6,000
eCommerce growth of 30-40%, but others continue to close
stores (~6K announced in 2018) 5,000
 The S&P Retail Index (XRT) declined 9% in 2018 while some major 4,000
US retailers were down substantially more – BestBuy (-23%),
3,000
JCPenney (-67%)
2,000
 Walmart, the worlds largest retailer, has been catching up with 1,000
Amazon on many fronts
0
 acquisitions to strengthen its digital channel – Flipkart, 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Jet.com, Hayneedle, ModCloth, Moosejaw, Shoes.com, Source: Coresight Research, Jefferies
Bonobos
 services to reduce friction for shoppers – expedited  At the same time we see online-only players establishing physical
delivery (as soon as same-day w/ Grocery Delivery) and presence
partnerships w/ Deliv, DoorDash and Postmates, crowd-
 AMZN acquired Whole Foods Market with 490+ stores in
sourced last-mile delivery w/ Spark Delivery, easier returns
North America and the UK in Aug ‘17
for 3P sellers’ goods sold by Walmart
 AMZN has been opening brick-and-mortar Books stores
 partnerships to offer a better consumer experience and/or
(18 through late Dec’18), 4-Star retail stores (3 through
lower costs – w/ Handy for product assembly, w/ Anthem
late Dec’18), and testing its cashier-less technology in
for lower Rx drug and med supplies costs
concept Amazon Go stores (7 through late Dec’18 with
 new services to expand digital presence – a subscription at least 3 more expected soon)
streaming service, eBook subscription service (w/ Kobo)

Company Update
April 3, 2019
3P Seller Services

Company Update
April 3, 2019
3P Seller Services – First-Class eCommerce Expertise as a White-Label Service

A look at a broad set of publicly-traded eCommerce Services comps yields a conservative value for Amazon’s 3P Seller
Services business in the $350B+ range
 We estimate Amazon’s 3P Seller Services business could grow from ~$43B in 2018 to ~$88B by 2022 (20% 4-year CAGR)
 Applying a growth-adjusted Revenue multiple in line with the avg for the comps below, we get a valuation in excess of $440B
 $440B = $88B in ‘22 Rev @ 5.0x (0.29 EV/Rev to Growth X 18% 2019-22 Rev CAGR)
 With a more conservative approach – applying a 20% discount to the avg growth-adjusted multiple – we get a valuation for the 3P Seller
Services business of $350B+
2018-21
Stock Market Enterprise Revenue EV/Rev Multiple Revenue EV/Rev
Alibaba Group Holding Ltd. Sponsored

$181.74ADR $467,423 $449,064 $70,936 $93,960 6.3x 4.8x 32% 0.15
JD.com, Inc. Sponsored ADR Class $30.29
A $36,469 $39,976 $81,894 $95,417 0.5x 0.4x 17% 0.02
eBay Inc. $37.92 $34,692 $37,932 $10,858 $11,518 3.5x 3.3x 5% 0.71
Square, Inc. Class A $75.60 $31,729 $31,510 $2,257 $3,034 14.0x 10.4x 37% 0.28
MercadoLibre, Inc. $509.99 $23,053 $22,140 $2,024 $2,849 10.9x 7.8x 40% 0.20
Shopify, Inc. Class A $201.46 $22,240 $20,465 $1,490 $1,965 13.7x 10.4x 34% 0.31
Etsy, Inc. $69.73 $8,337 $7,992 $793 $975 10.1x 8.2x 25% 0.32
Mean $89,135 $87,011 $24,321 $29,960 8.4x 6.5x 27% 0.29

Median $31,729 $31,510 $2,257 $3,034 10.1x 7.8x 32% 0.28
Revenue ($M)
EV/Revenue CY21E CY22E CY23E
Multiple $75,880 $88,020 $100,123
2.5x $189,699 $220,051 $250,308

3.0x $227,639 $264,061 $300,369
3.5x $265,578 $308,071 $350,431
4.0x $303,518 $352,081 $400,492
4.5x $341,458 $396,091 $450,554
5.0x $379,398 $440,101 $500,615
5.5x $417,337 $484,111 $550,677
Source: FactSet, Jefferies estimates

Company Update
April 3, 2019

Amazon’s 3P Seller Services – Sell on Amazon, Fulfillment by Amazon, Amazon Pay – give independent brands/sellers
access to the same eCommerce platform and capabilities that Amazon has built for itself
100
Amazon 3P Seller Services Revenue ($B)  Sell on Amazon: over 35 categories of products sold on Amazon
are open to 3P sellers but some require prior approval
90
80
88.0  Sellers have the option to chose a Professional plan ($39.99
75.9
monthly for >40 items a month) or an Individual plan (no
70
monthly fee for <40 items a month); both plans have selling fees
60 64.3
that vary by category (we estimate AMZN’s avg take rate at ~13%)
50
53.6
40
42.7
30
 Fulfillment by Amazon offers 3P sellers access to Amazon’s
31.9 first-class fulfillment infrastructure for a fee – fulfillment and
20
23.0 storage fees that vary by product size and weight
10
 Amazon stores the 3P products in its FCs and does the pick, pack,
0
2016 2017 2018 2019E 2020E 2021E 2022E and ship (along with customer service and returns)
Source: Company reports, Jefferies estimates  3P sellers can use the service even if they don’t sell on
Amazon.com
 Amazon’s 3P Seller Services business is growing faster than the
Core 1P retail business as more merchants are discovering the
leverage in sales they could get from Amazon’s best-in-class  Amazon Pay is a payment solution for 3P merchants that
eCommerce platform integrates seamlessly into their checkout process
 3P Seller Services is also more profitable than 1P and helps AMZN  3P research shows ~40K websites WW currently use Amazon Pay
with infrastructure utilization (reaching break-even faster on new
fulfillment investments)

Company Update
April 3, 2019

Fulfillment by Amazon (FBA) – First-Class Fulfillment as a White-Label Service
 Fulfillment by Amazon (FBA), launched in 2006, opens AMZN’s  AMZN has created a massive competitive moat with its best-in-class
fulfillment infrastructure as a service to external parties fulfillment capabilities
 This allows AMZN to squeeze better scale efficiencies and monetize  Its ability to get purchases to consumers fast is a huge differentiator
an asset initially developed for internal purposes that drives incremental growth in existing and new categories
 With 3P units over half of total today and FBA penetration estimated
at ~48% in ‘18, FBA has been growing very strong and driving
Amazon’s top line and margins
 Kiva robots (an older model pictured below), with their hard to
match efficiency, are key enablers of Amazon’s expedited delivery
services
 AMZN keeps expanding its fulfillment footprint with new facilities

closer to customers – square footage grew ~30% in ’16 and more
than 30% in ‘17
Source: Amazon, Jefferies
 Reportedly, today about 44% of the US population live within 20
miles of an AMZN warehouse, up from roughly 5% in 2015
 Kiva robots allow FCs to cut roughly 20% of operating costs while
 In addition, the Co. has been bringing in-house key pieces of the online orders can be processed in as little as 15 min in FCs with Kiva
fulfillment process (such as last-mile delivery, air freight, ocean robots vs. an average of ~2 hrs for other Amazon FCs
shipping) for better control of service levels and costs
 As of early 2019, over 100K Kiva robots roam across Amazon’s FCs
 AMZN WW parcel volume was estimated at ~5B units in 2017

Company Update
April 3, 2019
Advertising

Company Update
April 3, 2019
Amazon Advertising – Still Small but Margin Accretive

A look at a broad set of publicly-traded Digital Advertising comps yields a conservative value for Amazon’s Ad
business in the $150B range
 We estimate Amazon’s ad business could grow from ~$9B in 2018 to ~$33B by 2022 (38% 4-year CAGR)
 And while growing at a much faster clip than its major competitors, we use a conservative 4-5x EV/Sales multiple (the avg of what GOOGL
and FB trade at today) to arrive at potential valuation of ~$150B
2018-21
Alphabet Inc. Class A $1,205.54 $838,196 $737,035 $163,326 $192,153 4.5x 3.8x 18% 0.22
Facebook, Inc. Class A $174.20 $497,259 $449,119 $68,990 $83,458 6.5x 5.4x 22% 0.25
Twitter, Inc. $33.75 $25,880 $21,498 $3,489 $3,975 6.2x 5.4x 13% 0.40
Snap, Inc. Class A $11.22 $15,296 $14,279 $1,535 $1,969 9.3x 7.3x 28% 0.26
Yelp Inc $35.36 $2,900 $2,206 $1,024 $1,145 2.2x 1.9x 11% 0.18
Mean $275,906 $244,827 $47,673 $56,540 5.7x 4.8x 18% 0.26

Median $25,880 $21,498 $3,489 $3,975 6.2x 5.4x 18% 0.25
Revenue ($M)
Multiple $25,843 $32,925 $39,882
3.0x $77,528 $98,776 $119,647

3.5x $90,449 $115,239 $139,588
4.0x $103,370 $131,702 $159,529
4.5x $116,292 $148,165 $179,471
5.0x $129,213 $164,627 $199,412
5.5x $142,134 $181,090 $219,353
6.0x $155,055 $197,553 $239,294

Company Update
April 3, 2019

Advertisers looking for new places to allocate their digital ad spend increasingly turn to Amazon, utilizing its unique
daily touch points and conversion history to achieve better ability to target and offer true closed-loop attribution
Amazon Advertising Revenue ($B)  We estimate that Ad Revenue accounts for close to 90% of AMZN’s
35
Other Net Sales today with the remainder coming from co-branded
30
32.9 credit card agreements. We believe that our assumptions are
relatively conservative, both on the current / historical size of the ad
25
25.8 business (growing from ~66% of Other Net Sales in ’14 to ~90% in
’18 to 94% in ’22) and on its growth trajectory
20
19.2  We expect Advertising Revenue to grow ~2x faster than overall Net
15 Sales as Amazon gains momentum in its advertising business (38%
13.4 4-year CAGR 2018-22 vs. 17% for total Net Sales). For comparison,
10
Google revenues grew at a similar CAGR when its ad business was
9.1
5 approximately the same size in 2005/06
2.3 3.9
0 Worldwide Digital Ad Spend ($B)
2016 2017 2018 2019E 2020E 2021E 2022E 500 479 60%
Source: Company reports, Jefferies estimates 450 436 134
133 50%
400 385
 A number of consumer surveys have shown that more product 350 333 126
40%
33
searches start on Amazon.com (b/n 41% and 50%) than on Google 300 283 117
26 111
(b/n 28% and 38%) or anywhere else (b/n 12% and 31%) 250 233 103 19
98 30%
13
 Media reports from 2018 indicated major ad agencies (Publicis, WPP, 200 192 94
9
83
68 202
Omnicom) were considering significant increases (ranging from 50% 150
83
4 55 179
20%
157
to 100%) in their 2018 Amazon ad spend 100
2 40 135
27 116 7% 10%
5% 6%
95
 While Amazon needs to improve its Ad Tech and better O&O 50 79
2%
3% 4%
1%
inventory to truly compete, we estimate advertising revenue would 0 0%
more than double b/n 2018 ($9.1B) and 2020 ($19.2B) 2016 2017 2018 2019E 2020E 2021E 2022E
Google Facebook Amazon Other AMZN Mkt Share

 this would account for ~5% of total global online ad spend in 2020
[eMarketer] Source: eMarketer, Jefferies estimates

Company Update
April 3, 2019

Amazon’s growth coming from offline / fragmented sources as Top 3 take incremental ad dollars from digital transition
Major Internet Players’ Market Share of WW Advertising

 Google & Facebook will grow dollar share in lock step with
2019 2020 2021 2022
Amazon, as digital continues to take incremental share from GOOGL $135 $157 $179 $202
offline to online. We forecast Amazon will account for ~4% of % Growth y/y 16% 16% 14% 13%
% of Digital Advertising 41% 41% 41% 42%
global digital advertising by 2019, and Google & Facebook to % of Total Advertising 20% 22% 23% 25%
account for 41% and 20%, respectively % of Big 3 62% 61% 59% 58%
FB $68 $83 $98 $111
 Amazon’s market share growth will come at the expense of
% Growth y/y 23% 22% 18% 14%
disparate online sources as well as additional advertising % of Digital Advertising 20% 22% 22% 23%
% of Total Advertising 10% 12% 13% 14%
coming from offline sources (such as in-store displays)
% of Big 3 31% 32% 32% 32%
 We think that Amazon’s growth in Advertising is not a zero AMZN $13 $19 $26 $33
% Growth y/y 47% 43% 35% 27%
sum game with category leaders Google & Facebook, but
% of Digital Advertising 4% 5% 6% 7%
think it will take incremental share from long-tail websites % of Total Advertising 2% 3% 3% 4%
% of Big 3 6% 7% 9% 10%
where conversion isn’t as proven
Big 3 Total Advertising $217 $259 $302 $346
 Amazon will introduce a third player in the duopoly, but we
% Growth y/y 20% 20% 17% 14%
see these three continuing to grow at the expense of the % of Digital Advertising 65% 67% 69% 72%
Others $117 $126 $133 $134
larger playing field
% Growth y/y 13% 8% 6% 0%
 We see Google, Facebook, and Amazon as leaders in touch % of Digital Advertising 35% 33% 31% 28%
points with the consumer, and each has unique offerings Total Digital Advertising $333 $385 $436 $479
% Growth y/y 18% 16% 13% 10%
which will continue to attract advertiser spend
% to Total Advertising 50% 54% 57% 59%
Total Advertising $665 $718 $770 $814
% Growth y/y 8% 8% 7% 6%
Source: eMarketer, Jefferies estimates

Company Update
April 3, 2019

Where can Amazon differentiate?
Having the largest eCommerce platform in the US gives Amazon access to unique shopper insights and behavior
throughout the decision funnel
 These unique insights can translate into extremely actionable data that can be activated by advertisers of all sizes through Amazon’s
platform driving incremental sales and brand awareness
 Amazon can offer first-of-its-kind true closed-loop attribution, tracking ad dollars into real incremental sales
─ One hindrance for advertisers (both performance and brand) to spend more has hinged on the ability to track true conversion
─ Amazon can finally solve the “Wanamaker” issue “Half the money I spend on advertising is wasted; the trouble is I don’t know which
half”
Billions of consumer touch points = Actionable insights for a variety of marketers

 Amazon’s massive reach into the global consumer gives it unique insights into the shopping patterns and behaviors of consumers which it
can utilize to provide actionable targeting for a variety of different marketers
Machine Learning & Artificial Intelligence expertise

 Amazon applies machine learning and artificial intelligence to help advertisers drive unique insights into the effectiveness of campaigns
quickly and optimize in real time where ad dollars are being spent

Company Update
April 3, 2019

Sponsored Products is an advertiser’s dream of conversion and attribution
With ~50% of product searches in the US originating on Amazon, Sponsored Products offers advertisers direct to consumer
advertising at the point of sale with better targeting and post sale attribution than anywhere else on the web
 Sponsored Products is the foundation for Amazon’s advertising business – combining its vast amounts of user shopping data with machine
learning to allow real-time A/B testing in an environment at scale while providing true end-to-end attribution


Company Update
April 3, 2019

Amazon is not only Sponsored Products…
Amazon’s opportunity set isn’t limited to just product search on its own site (where ~50% of shopping searches begin)
 According to SimilarWeb, Amazon.com saw nearly 30B total visits in 2018 by 550M avg monthly unique visitors (desktop + mobile). This is a
very attractive audience for big brand advertisers – those that don’t perceive Amazon as a competitor – and we are already seeing brand ads
from the likes of Comcast, Direct TV, Hyundai, and Vanguard
In addition, Amazon’s ever growing business lines of media (Prime Video & Music), third-party seller support, and even
traditional retail (Whole Foods & Amazon Go) offer interesting advertising real estate it can test in real time
 Looking into the future we see an opportunity for Amazon to introduce an advertising supported video solution outside of Amazon Prime
 We also imagine a future with programmatically driven displays in an Amazon Go like environment where brands could target individual
shoppers directly at the purchase decision
Videos Online Shopping Digital Advertising Digital Advertising Store Analytics
Source: Jefferies

Company Update
April 3, 2019

Amazon’s push into video will expand its Owned & Operated inventory
We believe that Amazon’s greatest strength in advertising will be through its Owned & Operated inventory which will be
bolstered by a potential introduction of video ads in Prime Video
 Prime Video could expand its available media by pursuing an advertising supported model
 We think that Amazon could offer Amazon Instant Video through an ad-supported model (vs the current rent & own options) which would
bolster the amount of inventory available for advertising
 This TV on-demand like inventory would be very attractive for advertisers in a full-screen, sound on, TV like environment


Company Update
April 3, 2019

Amazon’s Twitch is a Premiere Digital Video Advertising Platform
Amazon’s highly engaged audience on Twitch can be utilized for unique advertising opportunities which will be attractive for
advertisers trying to reach millennials
 As millennials continue to shift their video consumption habits from linear TV to digital sources such as Twitch & YouTube, Amazon can
leverage this logged-in viewership as another source for advertising inventory
 Twitch’s platform is attractive for advertisers as it can combine a TV-like live experience and leverage Amazon’s tremendous data and
attribution capabilities to reach millennials
 Twitch boasts more than 100M monthly active viewers, 55% of which are between the ages of 18-34. Of those, 15M viewers check in daily
with 106 minutes watched per user per day


Company Update
April 3, 2019

Amazon in the home brings unique ad units
Having a central point in the home, Alexa offers unique ad units for brand advertisers
 While Alexa may not host traditional advertising, we believe that Amazon could offer premium branded tasks in Alexa such as “Alexa, how do
I clean a stain” with results highlighting certain branded products
Amazon’s core eCommerce offering brings packages directly into the home and is extending into branding opportunities
around packaging
 We have already begun to see early steps of initiatives bringing advertising in line with package delivery such as a box branded with an
upcoming film
 We think that these initiatives, combined with a data-driven approach utilizing Amazon’s unique consumption data (both physical and media)
can be a powerful tool for marketers


Company Update
April 3, 2019
Subscription

Company Update
April 3, 2019
Amazon Prime – Flywheel of the Core Business

A look at a broad set of publicly-traded Subscription comps yields a value for Amazon’s Subscription biz of $110B+
 We estimate Amazon’s subscription business (which includes Amazon Prime, Prime Video, Music Unlimited, Kindle Unlimited, FreeTime
Unlimited, and Twitch Prime) could double from ~$14B in 2018 to ~$29B by 2022 (19% 4-year CAGR)
 Applying the avg growth-adjusted Revenue multiple for the comps below, yields a $110B+ valuation
 However, we think our estimates could be conservative as the Co. does not monetize its digital content at optimal levels and there’s room
for more Prime fee increases (against the program’s huge value proposition)
2018-21
Netflix, Inc. $367.72 $160,546 $170,148 $20,253 $25,140 8.4x 6.8x 24% 0.28
Sirius XM Holdings, Inc. $5.87 $27,810 $34,982 $7,768 $8,292 4.5x 4.2x 15% 0.28
Spotify Technology SA $142.55 $25,321 $24,475 $7,479 $9,258 3.3x 2.6x 23% 0.11
Match Group, Inc. $56.68 $15,783 $16,360 $1,999 $2,300 8.2x 7.1x 15% 0.48
Stitch Fix, Inc. Class A $28.75 $2,878 $2,674 $1,689 $2,067 1.6x 1.3x 22% 0.06
Chegg, Inc. $38.28 $4,436 $4,075 $394 $478 10.3x 8.5x 24% 0.35
Shutterstock, Inc. $46.83 $1,643 $1,412 $688 $753 2.1x 1.9x 10% 0.19
HelloFresh SE $7.96 $1,306 $1,166 $1,622 $1,922 0.7x 0.6x 21% 0.03
Mean $29,965 $31,911 $5,237 $6,276 4.9x 4.1x 19% 0.22

Median $10,109 $10,218 $1,844 $2,184 3.9x 3.4x 21% 0.23
Revenue ($M)
Multiple $25,265 $28,626 $31,488
2.5x $63,164 $71,564 $78,721

3.0x $75,796 $85,877 $94,465
3.5x $88,429 $100,190 $110,209
4.0x $101,062 $114,503 $125,953
4.5x $113,695 $128,816 $141,697
5.0x $126,327 $143,129 $157,442
5.5x $138,960 $157,442 $173,186

Company Update
April 3, 2019

Amazon Prime, with an estimated 85M+ members in the US and over 130M globally, has become the flywheel of
AMZN’s core business
Amazon Subscription Revenue ($B)  Launched in 2005, Amazon Prime is available today in all of AMZN’s
35 markets (with the exception of Brazil where AMZN just expanded
operations in 2018 beyond books and a Kindle store)
30
 Amazon Prime offers free 2-day delivery on 100M+ eligible items (up
28.6
25 from ~50M at end of 2016) for $12.99/month or $119/year (effective
25.3
May 11, 2018 annual subscription went from $99 to $119)
20 21.8
 In addition, subscribers get free access to over 40K movies and TV
15
18.0 episodes, 2M+ songs, 1K+ books and magazines, original audio
14.2
series, photo storage, and other perks
10
9.7
 Over 5B items shipped with Prime in 2017
5 6.4
Prime Penetration (as % of Active Customers)
0
2016 2017 2018 2019E 2020E 2021E 2022E
WW
 Consumer surveys have shown consistently over time that Prime
members spend annually on average ~2x what non-members
spend (Source: CIRP)
 Digital content (video, music, books) accounts for a big piece of
US
Prime’s appeal to consumers and content consumption in 2017
exceeded any previous year
 Free digital content (as part of a Prime subscription) also creates
stickiness – according to a CIRP study, 73% of free-trial members
~35%
sign up for the service and 91% of them renew for a 2nd year, ~65%
96% for a 3rd year
page 40 of 58 Source: CIRP, Jefferies Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Company Update
April 3, 2019

Other subscription services – such as Prime Video, Amazon Music Unlimited, Amazon FreeTime Unlimited, Kindle
Unlimited, Twitch Prime – are still relatively new and just gaining traction among consumers
 Prime Video is Amazon’s subscription streaming service which

launched as a stand-alone offering in Apr’16 in the US and in
Dec’16 globally
 It offers access to thousands (50K+) of movies and TV shows from
major studios as well as Amazon Prime originals for $8.99/month
 Amazon Music Unlimited launched in Oct’16 and offers

unlimited ad-free access to tens of millions of songs
 Subscription plans start at $3.99/month for a single Echo device
and go as high as $14.99/month ($149/year) for a family plan
 Kindle Unlimited offers unlimited access to over 1M books, Source: Amazon, Jefferies
thousands of audiobooks and many magazines on any device
for $9.99/month
 Content spend has gone up notably since Amazon launched
 FreeTime Unlimited offers unlimited access to over 13K items Prime Video as a stand-alone service globally in late 2016; we
of kid-friendly content (books, movies, TV shows, educational estimate the Co. spends $5-6B annually on digital content
apps, and games) for $2.99/month 1-child / $9.99/month family
($83/year) for Prime members and $4.99/month 1-child /  User reactions to Amazon’s original content have been generally
$9.99/month family ($119/year) for non-members positive and some of its original programming has received solid
critical acclaim – winning 2 Academy Awards in 2017 and
multiple Emmy Awards (5 in 2015, 6 in 2016, 8 in 2018)
 Twitch Prime offers ad-free viewing and in-game loot for
$12.99/month ($119/year), included with Amazon Prime,
(international pricing varies)

Company Update
April 3, 2019
Grocery

Company Update
April 3, 2019
Amazon’s Whole Foods – a Foothold in an $800B Market

A look at a broad set of publicly-traded Grocery comps yields a value for Amazon’s Grocery biz of $9B+
 We conservatively estimate Amazon’s grocery business could grow from ~$17B in 2018 to ~$20B by 2022 (4% 4-year CAGR)
 Applying the avg growth-adjusted Revenue multiple for the comps below, yields a $9B+ valuation
 However, this is a market that Amazon just entered (with its WFM acquisition in Aug’17) and we believe disruption here is yet to come
2018-21
Walmart Inc. $96.94 $278,187 $324,653 $526,623 $544,835 0.62x 0.60x 3% 0.19
Costco Wholesale Corp $240.50 $105,791 $104,918 $155,562 $166,506 0.67x 0.63x 7% 0.09
Kroger Co. $23.76 $18,960 $32,434 $122,840 $126,090 0.26x 0.26x 2% 0.11
Casey's General Stores, Inc. $128.76 $4,717 $5,962 $9,496 $10,231 0.63x 0.58x 7% 0.09
Sprouts Farmers Markets, Inc. $21.09 $2,608 $3,302 $5,727 $6,337 0.58x 0.52x 10% 0.05
Ingles Markets, Incorporated Class$27.12
A $534 $1,400 $4,218 $4,306 0.33x 0.33x 2% 0.15
Smart & Final Stores, Inc. $5.11 $391 $964 $4,896 $5,072 0.20x 0.19x 3% 0.06
Mean $58,741 $67,662 $118,480 $123,340 0.47x 0.44x 5% 0.11

Median $4,717 $5,962 $9,496 $10,231 0.58x 0.52x 3% 0.09
Revenue ($M)
Multiple $19,434 $20,279 $21,141
0.30x $5,830 $6,084 $6,342

0.35x $6,802 $7,098 $7,399
0.40x $7,774 $8,112 $8,456
0.45x $8,745 $9,126 $9,514
0.50x $9,717 $10,140 $10,571
0.55x $10,689 $11,154 $11,628
0.60x $11,660 $12,168 $12,685

Company Update
April 3, 2019
Amazon’s Whole Foods – a Foothold in an $800B Market

At $14B, Whole Foods Market is Amazon’s biggest acquisition to date and a clear indicator of its interest in the space
 In a world where the lines between online and offline retail are Amazon Grocery Revenue ($B)
25
blurring, Whole Foods has closed a gap in Amazon’s strategy by
providing the physical base for a direct connection with shoppers
and strategic infrastructure for last-mile fulfillment capabilities 20
20.3
19.4
 Whole Foods gives Amazon additional touch points with shoppers 17.2
17.7
18.6
15
to generate valuable data on consumer preferences and behavior
which then Amazon uses to power its algorithms to drive decisions
in the core retail business 10
 With Whole Foods, Amazon also acquired prime real estate /

physical presence closer to shoppers which allows the Co. to 5
5.8
optimize further its fulfillment function – e.g. by placing Amazon

Lockers in WF stores – for better service levels and cost efficiency 0
2016 2017 2018 2019E 2020E 2021E 2022E
 Lastly, the acquisition of Whole Foods is expected to fast-track

Amazon Fresh and Pantry – its internal efforts to build a grocery
business
 Launched in 2007, Prime Fresh is available today in ~20 metro
areas in the US and abroad (still exclusively to Prime members only)
 It offers free same-day delivery on over half a million items for orders
received by 10am, and early next-day delivery for orders after the
cut-off time, for a monthly fee of $14.99
 Prime Pantry is also exclusively offered to Prime members – for a
$4.99 a month Pantry members get free shipping on orders of $40
or more; orders without Pantry membership cost $7.99 per order
Source: Amazon

Company Update
April 3, 2019
Our Thesis

Company Update
April 3, 2019
Amazon (AMZN) $890B Market Cap, Buy $2,300 PT

Investor Debate: Investors are focused on top line growth, international Amazon US GMV and Market Share ($B)
expansion, and investment levels for AWS, fulfillment and content
900 90%
822
 Bulls Will Say…
800 80%
 AMZN is best positioned to benefit from the secular shift of commerce 734
from offline to online and growing eCommerce penetration 700 652 70%
 Better than expected profitability shows the level of leverage embedded 600
580
60%
513
in the model 500 449 50%
 AWS (2.5x bigger than its next competitor) remains an underappreciated 388 38% 40% 40% 41% 41%
asset with its massive recurring revenue stream and strong profitability 400
29%
33%
300
337 40%
 AMZN continues gaining market share from offline and online retailers 300
230
264 30%
 Its competitive moat is one of the biggest among technology companies 200 148
196
20%
 International opportunities (India, China and other untapped geos) carry 111
100 10%
huge potential for AMZN
 Continued buildup in fulfillment (30% increase in sq ft in 2016, >30% in 0 0%
2016 2017 2018 2019E 2020E 2021E 2022E
2017) follows solid Prime and FBA growth
 Bears Will Say… US Retail eCommerce AMZN US GMV AMZN Market Share
 Revenue growth is decelerating
 Stock continues to look expensive trading at ~17x Forward EV/EBITDA Source: Company reports, US Dep’t of Commerce, Jefferies estimates
 Despite some deceleration in investment, absolute levels remain high

 Competition in Cloud Computing is strong and other players are Historical EV / EBITDA Multiple
growing faster 33 .0
 Valuation: even at recent levels AMZN looks undervalued on growth-

adjusted EV/EBITDA and against historical trends (currently trading at ~0.6 28 .0
EV/EBITDA to Growth)
23 .0
 Jefco take…
 AMZN keeps gaining market share by reducing friction for shoppers
18 .0
(better selection, product availability, convenience)
 AMZN's ability to get purchases to consumers fast is a huge differentiator
that drives incremental growth in existing and new categories 13 .0
 The global AWS opportunity is a revenue growth engine with

corresponding margin accretion to the overall business 8.0
 Investment in AWS, content, fulfillment supports expansion into new

products, services, geos with huge potential (each a contender to be the
next multi-billion dollar opportunity) EV/EB ITDA Historical Average
Source: FactSet, Jefferies

Company Update
April 3, 2019
Amazon – Key Metrics

Retail: Valuation:
 Commodity under threat, specialty retailers more immune  Current mkt cap ~$890B
 AMZN accounts for ~40% (~$195B) of US retail eCommerce  SOTP
 eBay 7% (~$38B); Walmart 4% (~$21B)  AWS ~$73B biz in ’22 => @ 7.0x = $500B+
 Walmart: ~$21B online, ~$388B total US (incl. Sam’s Club)  Retail biz ~$370B in ’22 => @ 2.7x = $1,000B+
Financial highlights:  Combined >$1.5T mkt cap
 $233B rev in ’18, 31% growth; $275B in ’19, +18%
 Low single digit Op Mgn: 5.3% in ’18, ~6.2% in ’19 Stats:
Prime:  About 1/2 of all consumers start their product search on
 >130M members WW (85M+ in the US) Amazon.com
 10s of millions of people WW started Prime free trials or paid  3P units 50%+ of total
memberships during 2018 holiday season  3P GMV $170B vs. 1P $115B (TTM) ex-Whole Foods
 Latest markets launched: Australia (’18) and Mexico (‘17)
 >5B items shipped with Prime in ‘17  2018 holiday season stats
Next steps (market opportunity):  Customers’ use of Alexa for shopping more than tripled
 Healthcare – $3T market but many hurdles this year compared to last year
 PillPack acquisition signals strong interest in the space  In the US alone, more than 1B items shipped for free this
holiday with Prime
 Apparel – $3T market, >$20B sales (incl. 3P)
 Millions of items shipped in the US with Prime Free Same-
 at least 66 private labels generating tens of millions in sales Day/Free One-Day/Free 2-hour Now
 B2B (Amazon Business) – $1T market, $10B+ in sales  Sold millions more Amazon devices compared to last year
 Groceries – $800B market, ~$17B Whole Foods sales (when AMZN sold “10s of millions” of Alexa devices)
 Bigger push into Cloud Computing (on-prem, SaaS)  Echo Dot was again a best-selling product on Amazon.com
(3rd year in a row)
 Smart-home devices, home security

Company Update
April 3, 2019
Stock Performance

Company Update
April 3, 2019
10-Year Stock Performance
Source: FactSet

Company Update
April 3, 2019
Current Valuation Offers Further Upside

Historical EV / EBITDA Multiple Historical EV / Sales Multiple
33.0 4.0
3.5
28.0
3.0
2.5
23.0
2.0
18.0
1.5
1.0
13.0
0.5
8.0 0.0
EV/EBITDA Historical Average EV/Sales Historical Average
Source: FactSet, Jefferies Source: FactSet, Jefferies
 At $1,800, AMZN currently trades at about 17x consensus 2020 EBITDA vs. 2018-21 consensus EBITDA CAGR of 27%
 AMZN’s current EV/EBITDA multiple is roughly 0.9 std dev below its 10-year mean
 On a growth-adjusted basis, AMZN trades at a material discount to comps and particularly vs. brick-and-mortar retailers
 AMZN’s stock currently trades at ~0.61 cons EV/EBITDA to Growth compared to a mean of ~2.69 for a broader set of comps
 AMZN’s current EV/Sales multiple is roughly 1.7 std dev above its 10-year mean but it should be noted that the share of 3P sales
(recorded net on the P&L) has doubled from the end of 2006 to today
 On EV/Sales to Growth, the stock is trading at ~0.16 (or ~0.10 if using AMZN GMV instead of Sales for apples-to-apples comparison) vs. a
mean of 0.49 for brick-and-mortar comps

AMZN
Company Update
April 3, 2019
Exhibit 1: Amazon - Income Statement ($000s)

F2018 F2019
Q1 18A Q2 18A Q3 18A Q4 18A Q1 19E Q2 19E Q3 19E Q4 19E F2018A F2019E F2020E
Net Sales $51,042,000 $52,886,000 $56,576,000 $72,383,000 $59,884,191 $62,406,896 $67,137,087 $85,113,042 $232,887,000 $274,541,216 $324,777,888
North America Net Sales 26,462,000 27,857,000 30,100,000 39,723,000 30,854,692 32,704,118 35,367,500 46,475,910 124,142,000 145,402,220 170,847,609
International Net Sales 14,875,000 14,612,000 15,549,000 20,829,000 16,808,750 16,657,680 18,114,585 23,953,350 65,865,000 75,534,365 88,375,207
AWS Net Sales 5,442,000 6,105,000 6,679,000 7,430,000 7,825,596 8,608,050 9,283,810 10,141,950 25,656,000 35,859,406 46,975,822
Physical Stores Net Sales 4,263,000 4,312,000 4,248,000 4,401,000 4,395,153 4,437,048 4,371,192 4,541,832 17,224,000 17,745,225 18,579,251
% Y/Y Growth 43% 39% 29% 20% 17% 18% 19% 18% 31% 18% 18%
% Q/Q Growth (16) 4 7 28 (17) 4 8 27 -- -- --
Cost of Sales 30,720,000 30,613,000 32,984,000 44,765,000 34,644,656 35,004,012 37,954,154 49,667,514 139,082,000 157,270,336 180,385,689
Total Gross Profit $20,322,000 $22,273,000 $23,592,000 $27,618,000 $25,239,535 $27,402,884 $29,182,933 $35,445,528 $93,805,000 $117,270,880 $144,392,199
% Margin 39.8% 42.1% 41.7% 38.2% 42.1% 43.9% 43.5% 41.6% 40.3% 42.7% 44.5%
Fulfillment 7,548,000 7,612,000 8,006,000 9,741,000 8,975,336 9,637,636 10,339,700 13,113,860 32,907,000 42,066,532 51,063,149
Marketing 2,538,000 2,711,000 3,102,000 4,694,000 3,029,167 3,464,282 3,918,047 5,604,650 13,045,000 16,016,146 17,647,734
Technology & Content 6,128,000 6,459,000 6,443,000 6,919,000 7,404,000 7,774,000 8,054,000 8,304,000 25,949,000 31,536,000 37,411,000
General & Administrative 935,000 960,000 899,000 975,000 1,003,000 1,027,000 1,047,000 1,114,000 3,769,000 4,191,000 4,541,000
GAAP Operating Income / (Loss) incl SBC & Amort. of 1,927,000

Intangibles 2,983,000 3,724,000 3,786,000 3,454,562 3,786,486 4,228,186 5,618,831 12,420,000 17,088,065 27,132,322
% Margin 3.8% 5.6% 6.6% 5.2% 5.8% 6.1% 6.3% 6.6% 5.3% 6.2% 8.4%
% Y/Y Growth 92 375 973 78 79 27 14 48 202 38 59
% Q/Q Growth (9) 55 25 2 (9) 10 12 33 -- -- --
EBITDA $6,844,000 $8,161,000 $8,920,000 $9,551,000 $9,438,511 $10,147,423 $10,513,897 $12,053,342 $33,476,000 $42,153,172 $57,579,217
% Margin 13.4% 15.4% 15.8% 13.2% 15.8% 16.3% 15.7% 14.2% 14.4% 15.4% 17.7%
% Y/Y Growth 60 82 103 39 38 24 18 26 67 26 37
% Q/Q Growth (0) 19 9 7 (1) 8 4 15 -- -- --
Net Interest and Other (Income) Expense 11,000 378,000 334,000 436,000 250,289 246,661 237,735 211,840 1,159,000 946,525 705,330
Adjusted Pre-Tax Profit / (Loss) $3,162,000 $4,153,000 $4,808,000 $4,853,000 $4,577,743 $5,253,305 $5,586,451 $7,097,179 $16,976,000 $22,514,678 $33,023,986
% Effective Tax Rate 17% 10% 17% 13% 19% 19% 19% 19% 14% 19% 19%
Provision / (Benefit) for Income Taxes 287,000 74,000 508,000 327,000 608,812 672,567 758,186 1,027,328 1,196,000 3,066,893 5,021,128
Tax Adjustments for Non-GAAP Items 261,660 325,080 297,780 315,630 281,561 351,263 327,180 346,488 1,200,150 1,306,493 1,385,369
Minority Interest 0 (3,000) (1,000) (4,000) 0 (2,400) (800) (3,200) (8,000) (6,400) (5,120)
Operating Net Income / (Loss) $2,613,340 $3,756,920 $4,003,220 $4,214,370 $3,687,370 $4,231,875 $4,501,885 $5,726,562 $14,587,850 $18,147,692 $26,622,609
% Margin 5.1% 7.1% 7.1% 5.8% 6.2% 6.8% 6.7% 6.7% 6.3% 6.6% 8.2%
% Y/Y Growth 106 278 304 58 41 13 12 36 147 24 47

% Q/Q Growth (2) 44 7 5 (13) 15 6 27 -- -- --
Other Operating Expense/Amortization of Intangibles 63,000 80,000 68,000 86,000 84,000 84,000 84,000 84,000 297,000 336,000 258,000
Stock-Based Compensation 1,183,000 1,468,000 1,350,000 1,417,000 1,289,470 1,629,480 1,512,000 1,606,187 5,418,000 6,037,137 6,338,994
Tax Effect of Non-GAAP Entries (261,660) (325,080) (297,780) (315,630) (281,561) (351,263) (327,180) (346,488) (1,200,150) (1,306,493) (1,385,369)
Reported GAAP Net Income / (Loss) $1,629,000 $2,534,000 $2,883,000 $3,027,000 $2,595,461 $2,869,658 $3,233,065 $4,382,863 $10,073,000 $13,081,048 $21,410,983
% Margin 3.2% 4.8% 5.1% 4.2% 4.3% 4.6% 4.8% 5.1% 4.3% 4.8% 6.6%
% Y/Y Growth 125 1,186 1,026 63 59 13 12 45 232 30 64
% Q/Q Growth (12) 56 14 5 (14) 11 13 36 -- -- --
Weighted Avg. Diluted Shares Outstanding 498,000 500,000 501,000 501,000 500,226 501,066 501,949 502,803 500,000 501,511 506,040
Operating EPS $5.25 $7.51 $7.99 $8.41 $7.37 $8.45 $8.97 $11.39 $29.18 $36.19 $52.61
% Y/Y Growth 103% 272% 299% 57% 40% 12% 12% 35% 143% 24% 45%
% Q/Q Growth (2) 43 6 5 (12) 15 6 27 -- -- --
Reported GAAP EPS $3.27 $5.07 $5.75 $6.04 $5.19 $5.73 $6.44 $8.72 $20.14 $26.08 $42.31
% Y/Y Growth 121% 1,166% 1,010% 61% 59% 13% 12% 44% 227% 29% 62%
% Q/Q Growth (13) 55 14 5 (14) 10 12 35 -- -- --
Source: Company data, Jefferies
Exhibit 2: Amazon - Revenue Build ($000s)

F2018 F2019
Total Revenue $51,042,000 $52,886,000 $56,576,000 $72,383,000 $59,884,191 $62,406,896 $67,137,087 $85,113,042 $232,887,000 $274,541,216 $324,777,888
% Y/Y Growth 43% 39% 29% 20% 17% 18% 19% 18% 31% 18% 18%
% Q/Q Growth (16) 4 7 28 (17) 4 8 27 -- -- --
Ex-FX Total Revenue 49,492,000 52,126,000 56,836,000 73,184,000 60,693,105 62,933,949 67,181,732 84,808,521 214,414,000 257,872,083
% Y/Y Growth ex-FX 39% 37% 30% 21% 19% 19% 19% 17% 21% 11%
Total North America Revenue $26,462,000 $27,857,000 $30,100,000 $39,723,000 $30,854,692 $32,704,118 $35,367,500 $46,475,910 $124,142,000 $145,402,220 $170,847,609
% Y/Y Growth 26% 25% 25% 21% 17% 17% 18% 17% 24% 17% 18%
% Q/Q Growth (19) 5 8 32 (22) 6 8 31 -- -- --
% of Total Revenue 52 53 53 55 52 52 53 55 53 53 53
Amazon Web Services $5,442,000 $6,105,000 $6,679,000 $7,430,000 $7,825,596 $8,608,050 $9,283,810 $10,141,950 $25,656,000 $35,859,406 $46,975,822
% Y/Y Growth 49% 49% 46% 45% 44% 41% 39% 37% 47% 40% 31%
% Q/Q Growth 6 12 9 11 5 10 8 9 -- -- --
Total International Revenue $14,875,000 $14,612,000 $15,549,000 $20,829,000 $16,808,750 $16,657,680 $18,114,585 $23,953,350 $65,865,000 $75,534,365 $88,375,207
% Y/Y Growth 34% 27% 13% 15% 13% 14% 17% 15% 21% 15% 17%
% of Total Revenue 29 28 27 29 28 27 27 28 28 28 27
Physical Stores $4,263,000 $4,312,000 $4,248,000 $4,401,000 $4,395,153 $4,437,048 $4,371,192 $4,541,832 $17,224,000 $17,745,225 $18,579,251
% Y/Y Growth -- -- 233% (3%) 3% 3% 3% 3% 197% 3% 4.7%
% Q/Q Growth (6) 1 (1) 4 (0) 1 (1) 4 -- -- --
% of Total Revenue 8 8 8 6 7 7 7 5 7 6 6

AMZN
Company Update
April 3, 2019
Exhibit 3: Amazon - Balance Sheet ($000s)

F2018 F2019
Cash & Cash Equivalents $16,676,000 $19,823,000 $20,425,000 $31,750,000 $30,591,925 $37,275,478 $44,592,988 $58,408,486 $31,750,000 $58,408,486 $97,299,985
Short-Term Marketable Securities 8,287,000 7,227,000 9,340,000 9,500,000 9,500,000 9,500,000 9,500,000 9,500,000 9,500,000 9,500,000 9,500,000
Accounts Receivable 10,591,000 11,046,000 12,635,000 14,891,000 13,387,808 13,951,788 15,597,877 17,722,168 14,891,000 17,722,168 21,174,693
Inventories 13,840,000 14,824,000 15,862,000 17,174,000 14,920,931 15,919,633 16,928,593 19,594,855 17,174,000 19,594,855 21,980,669
Other Current Assets 1,435,000 1,561,000 1,623,000 1,786,000 1,796,212 1,839,845 1,915,417 2,025,829 1,786,000 2,025,829 2,323,377
Current Assets $50,829,000 $54,481,000 $59,885,000 $75,101,000 $70,196,877 $78,486,744 $88,534,874 $107,251,337 $75,101,000 $107,251,337 $152,278,724
Property and Equipment 52,331,000 54,768,000 58,019,000 61,797,000 62,562,522 63,767,065 64,659,354 66,217,031 61,797,000 66,217,031 67,501,529
Goodwill 13,388,000 13,944,000 14,553,000 14,548,000 14,548,000 14,548,000 14,548,000 14,548,000 14,548,000 14,548,000 14,548,000
Deferred Tax Assets 128,000 267,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Other Assets 9,686,000 10,640,000 11,237,000 11,201,000 11,838,672 12,703,693 13,734,943 14,405,893 11,201,000 14,405,893 16,739,432
Total Assets $126,362,000 $134,100,000 $143,695,000 $162,648,000 $159,147,070 $169,506,502 $181,478,171 $202,423,261 $162,648,000 $202,423,261 $251,068,686
Accounts Payable $25,172,000 $27,657,000 $30,904,000 $38,192,000 $29,234,394 $31,839,266 $35,354,555 $45,177,026 $38,192,000 $45,177,026 $51,075,766
Accrued Expenses & Other Liabilities 16,638,000 17,109,000 18,376,000 22,606,000 21,146,317 21,727,695 22,517,832 24,535,036 22,606,000 24,535,036 27,614,879
Unearned Revenue 6,182,000 6,004,000 6,000,000 6,536,000 7,361,367 7,534,348 7,919,979 9,287,044 6,536,000 9,287,044 12,934,801
Short-Term Debt 53,000 31,000 44,000 1,057,000 1,043,000 1,029,000 2,015,000 1,000,000 1,057,000 1,000,000 1,000,000
Total Current Liabilities $48,045,000 $50,801,000 $55,324,000 $68,391,000 $58,785,079 $62,130,309 $67,807,366 $79,999,106 $68,391,000 $79,999,106 $92,625,446
Long-Term Debt 24,640,000 24,638,000 24,684,000 23,495,000 23,495,000 23,495,000 22,495,000 22,495,000 23,495,000 22,495,000 21,495,000
Other LT Liabilities 22,214,000 23,666,000 24,562,000 27,213,000 27,433,060 27,948,124 28,497,671 29,261,970 27,213,000 29,261,970 31,531,078
Minority Interest 0 0 0 0 0 0 0 0 0 0 0
Total Liabilities $94,899,000 $99,105,000 $104,570,000 $119,099,000 $109,713,139 $113,573,432 $118,800,037 $131,756,076 $119,099,000 $131,756,076 $145,651,523
Additional Paid-In Capital 22,568,000 24,033,000 25,380,000 26,796,000 30,085,470 33,714,950 37,226,950 40,833,137 26,796,000 40,833,137 54,172,131
Retained Earnings (Accumulated Deficit) 11,199,000 13,733,000 16,616,000 19,625,000 22,220,461 25,090,119 28,323,184 32,706,048 19,625,000 32,706,048 54,117,031
Treasury Stock (1,837,000) (1,837,000) (1,837,000) (1,837,000) (1,837,000) (1,837,000) (1,837,000) (1,837,000) (1,837,000) (1,837,000) (1,837,000)
Accumulated Other Comprehensive Income (467,000) (934,000) (1,034,000) (1,035,000) (1,035,000) (1,035,000) (1,035,000) (1,035,000) (1,035,000) (1,035,000) (1,035,000)
Shareholders' Equity $31,463,000 $34,995,000 $39,125,000 $43,549,000 $49,433,931 $55,933,069 $62,678,134 $70,667,185 $43,549,000 $70,667,185 $105,417,163
Liabilities & Shareholders' Equity $126,362,000 $134,100,000 $143,695,000 $162,648,000 $159,147,070 $169,506,502 $181,478,171 $202,423,261 $162,648,000 $202,423,261 $251,068,686

Exhibit 4: Amazon - Cash Flow Statement ($000s)

F2018 F2019
Net Income $1,629,000 $2,534,000 $2,883,000 $3,027,000 $2,595,461 $2,869,658 $3,233,065 $4,382,863 $10,073,000 $13,081,048 $21,410,983
Depreciation 3,671,000 3,630,000 3,778,000 4,262,000 4,610,478 4,647,457 4,689,711 4,744,323 15,341,000 18,691,969 23,849,901
Tax Benefit from Stock Options 0 0 0 0 (0) 0 0 0 0 0 (0)
Stock-Based Compensation 1,182,000 1,468,000 1,350,000 1,417,000 1,289,470 1,629,480 1,512,000 1,606,187 5,417,000 6,037,137 6,338,994
Deferred Taxes 141,000 (139,000) 266,000 173,000 0 0 0 0 441,000 0 0
(Gain) / Loss on Sale of Securities 0 0 0 0 0 0 0 0 0 0 0
Other Non-Cash Charges (128,000) 195,000 158,000 269,000 0 0 0 0 494,000 0 0
Funds From Operations $6,495,000 $7,688,000 $8,435,000 $9,148,000 $8,495,409 $9,146,595 $9,434,776 $10,733,374 $31,766,000 $37,810,154 $51,599,879
(Inc.) Dec. in Accounts Receivable and Other 1,029,000 (1,364,000) (2,884,000) (1,395,000) 855,308 (1,472,634) (2,752,911) (2,905,652) (4,614,000) (6,275,889) (6,083,613)
(Inc.) Dec. in Inventories 2,220,000 (1,090,000) (1,094,000) (1,350,000) 2,253,069 (998,702) (1,008,960) (2,666,262) (1,314,000) (2,420,855) (2,385,814)
Inc. (Dec.) in Accounts Payable (10,216,000) 2,703,000 3,894,000 6,882,000 (8,957,606) 2,604,871 3,515,289 9,822,472 3,263,000 6,985,026 5,898,739
Inc. (Dec.) in Accrued Expenses and Other (2,225,000) (205,000) 237,000 2,665,000 (1,239,622) 1,096,441 1,339,685 2,781,503 472,000 3,978,006 5,348,950
Addition to Unearned Revenue 4,806,000 3,784,000 4,144,000 5,132,000 5,059,705 4,601,650 4,964,629 6,204,071 17,866,000 20,830,056 28,125,572
Amortization of Unearned Revenue (3,900,000) (4,067,000) (4,144,000) (4,604,000) (4,234,338) (4,428,669) (4,578,998) (4,837,007) (16,715,000) (18,079,013) (24,477,814)
Change in Net Working Capital ($8,286,000) ($239,000) $153,000 $7,330,000 ($6,263,484) $1,402,958 $1,478,734 $8,399,125 ($1,042,000) $5,017,332 $6,426,019
Cash Flow from Operations ($1,791,000) $7,449,000 $8,588,000 $16,478,000 $2,231,925 $10,549,553 $10,913,510 $19,132,498 $30,724,000 $42,827,486 $58,025,898
Capital Expenditures (2,727,000) (2,949,000) (2,527,000) (3,119,000) (3,376,000) (3,852,000) (3,582,000) (4,302,000) (11,322,000) (15,112,000) (18,134,400)
Acquisitions, Net of Cash Acquired (13,000) (866,000) (976,000) (331,000) 0 0 0 0 (2,186,000) 0 0
Purchases of Securities and Investments (470,000) (537,000) (4,033,000) (2,060,000) 0 0 0 0 (7,100,000) 0 0
Proceeds from Sales of Securities and Investments 2,677,000 1,660,000 1,964,000 1,938,000 0 0 0 0 8,239,000 0 0
Net Cash Used in Investing Activities ($533,000) ($2,692,000) ($5,572,000) ($3,572,000) ($3,376,000) ($3,852,000) ($3,582,000) ($4,302,000) ($12,369,000) ($15,112,000) ($18,134,400)
Debt Issuance / (Repayment) (2,164,000) (1,394,000) (2,369,000) (1,760,000) (14,000) (14,000) (14,000) (1,015,000) (7,687,000) (1,057,000) (1,000,000)
Proceeds from / (Repurchase of) Common Stock 0 0 0 0 0 0 0 0 0 0 0
Excess Tax Benefit from Stock Options 0 0 0 0 0 0 0 0 0 0 0
Net Cash Provided by Financing Activities ($2,164,000) ($1,394,000) ($2,369,000) ($1,760,000) ($14,000) ($14,000) ($14,000) ($1,015,000) ($7,687,000) ($1,057,000) ($1,000,000)
Effect of Exchange Rate Changes 248,000 (443,000) (151,000) (5,000) 0 0 0 0 (351,000) 0 0
Inc. (Dec.) in Cash and Cash Equivalents ($4,240,000) $2,920,000 $496,000 $11,141,000 ($1,158,075) $6,683,553 $7,317,510 $13,815,498 $10,317,000 $26,658,486 $38,891,498
Beginning Cash and Cash Equivalents 20,522,000 16,676,000 19,823,000 20,425,000 31,750,000 30,591,925 37,275,478 44,592,988 20,522,000 31,750,000 58,408,486
Restricted Cash Adjustment 394,000 227,000 106,000 184,000 0 0 0 0 911,000 0 0
Ending Cash and Cash Equivalents $16,676,000 $19,823,000 $20,425,000 $31,750,000 $30,591,925 $37,275,478 $44,592,988 $58,408,486 $31,750,000 $58,408,486 $97,299,985

AMZN
Company Update
April 3, 2019
Exhibit 5: Amazon - DCF Analysis ($MM)

2019
2018A Q1 19E Q2 19E Q3 19E Q4 19E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E
Revenue $232,887 $59,884 $62,407 $67,137 $85,113 $324,778 $381,030 $443,441 $509,417 $580,934 $653,493 $728,182 $803,431 $877,405
% Y/Y Growth 31% 17% 18% 19% 18% 18% 17% 16% 15% 14% 12% 11% 10% 9%
EBITDA $33,476 $9,439 $10,147 $10,514 $12,053 $57,579 $71,697 $89,683 $110,448 $135,601 $163,495 $194,134 $226,587 $260,099
% Margin 14% 16% 16% 16% 14% 18% 19% 20% 22% 23% 25% 27% 28% 30%
% Y/Y Growth 67 38 24 18 26 37 25 25 23 23 21 19 17 15
Implied Taxes on Operations ($4,725) ($1,836) ($1,978) ($2,043) ($2,333) ($11,170) ($13,833) ($17,241) ($21,183) ($25,963) ($31,265) ($37,091) ($43,263) ($49,637)
% Effective Tax Rate 14% 19% 19% 19% 19% 19% 19% 19% 19% 19% 19% 19% 19% 19%
Capital Expenditures ($11,322) ($3,376) ($3,852) ($3,582) ($4,302) ($18,134) ($21,399) ($24,822) ($28,297) ($31,693) ($34,863) ($38,000) ($41,040) ($43,913)
% Y/Y Growth 13% 24% 31% 42% 38% 20% 18% 16% 14% 12% 10% 9% 8% 7%
Change in Net Working Capital ($1,042) ($6,263) $1,403 $1,479 $8,399 $6,426 $7,094 $7,566 $8,092 $8,531 $8,491 $8,762 $9,179 $9,033
Tax Benefit from NOL Carryforwards 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Acquisitions Not Yet Reflected on BS -- 0 0 0 0 0 0 0 0 0 0 0 0 0
Unlevered Free Cash Flow $16,387 ($2,037) $5,721 $6,368 $13,817 $34,701 $43,559 $55,185 $69,059 $86,477 $105,858 $127,805 $151,463 $175,581
NPV at 12/31/18 Valuation Date and 12.0% WACC ($1,981) $5,408 $5,850 $12,337 $29,267 $32,802 $37,104 $41,458 $46,337 $50,645 $54,594 $57,767 $59,773
Perpetuity Growth Rate / Terminal Value at 12.0% WACC Implied Terminal Value / Terminal EBITDA Multiple
3.0% 3.5% 4.0% 4.5% 5.0% 8.0x 8.5x 9.1x 9.8x 10.5x
$2,086,329 $2,219,778 $2,369,908 $2,540,055 $2,734,509 $2,086,329 $2,219,778 $2,369,908 $2,540,055 $2,734,509
Median DCF Valuation at 12/31/18 Valuation Date WACC Equity Value per Share
NPV of Cash Flows and Terminal Value $1,151,702 10% $2,486 $2,582 $2,691 $2,814 $2,954
Plus: Net Cash 16,698 11% 2,300 2,387 2,486 2,598 2,726
Implied Equity Value $1,168,400 12% 2,130 2,210 2,300 2,402 2,518
Implied Fully Diluted Shares Outstanding (MM) 508 13% 1,976 2,049 2,131 2,224 2,330
Implied Equity Value per Share $2,300 14% 1,836 1,902 1,977 2,061 2,158
Source: Jefferies

AMZN
Company Update
April 3, 2019
Company Description
Amazon.com, Inc
Amazon is a leading eCommerce player in the United States with a large and growing presence in international markets. The company offers
a large selection across dozens of product categories and reports revenues into 3 segments: North America, International, and AWS, its Cloud
Computing business.
Company Valuation/Risks
Amazon.com, Inc
Our $2,300 PT is based on a 10-year DCF (12% WACC, 4% LTGR). Risks: Ongoing need to invest keeps a lid on margin expansion; regulatory
changes lead to increasing costs; macroeconomic headwinds cause top-line growth to slow
Analyst Certification:
I, Brent Thill, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations
or views expressed in this research report.
I, Brian Fitzgerald, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
I, Stan Velikov, CFA, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
I, John Byun, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
I, John Streppa, CFA, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and
As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives
compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as
appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority
of reports are published at irregular intervals as appropriate in the analyst's judgement.
Investment Recommendation Record

(Article 3(1)e and Article 7 of MAR)
Recommendation Published April 3, 2019 , 00:53 ET.
Recommendation Distributed April 3, 2019 , 00:53 ET.
Company Specific Disclosures

Steven DeSanctis owns shares of Amazon.com common shares.
Jefferies Group LLC makes a market in the securities or ADRs of Amazon.com, Inc.
Explanation of Jefferies Ratings

Buy - Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period.
Hold - Describes securities that we expect to provide a total return (price appreciation plus yield) of plus 15% or minus 10% within a 12-month period.
Underperform - Describes securities that we expect to provide a total return (price appreciation plus yield) of minus 10% or less within a 12-month
period.
The expected total return (price appreciation plus yield) for Buy rated securities with an average security price consistently below $10 is 20% or more
within a 12-month period as these companies are typically more volatile than the overall stock market. For Hold rated securities with an average
security price consistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For
Underperform rated securities with an average security price consistently below $10, the expected total return (price appreciation plus yield) is minus
20% or less within a 12-month period.
NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/
or Jefferies policies.
CS - Coverage Suspended. Jefferies has suspended coverage of this company.
NC - Not covered. Jefferies does not cover this company.
Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securities regulations
prohibit certain types of communications, including investment recommendations.

AMZN
Company Update
April 3, 2019
Monitor - Describes securities whose company fundamentals and financials are being monitored, and for which no financial projections or opinions
on the investment merits of the company are provided.
Valuation Methodology
Jefferies' methodology for assigning ratings may include the following: market capitalization, maturity, growth/value, volatility and expected total
return over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of market
risk, growth rate, revenue stream, discounted cash flow (DCF), EBITDA, EPS, cash flow (CF), free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF, P/
FCF, premium (discount)/average group EV/EBITDA, premium (discount)/average group P/E, sum of the parts, net asset value, dividend returns, and
return on equity (ROE) over the next 12 months.
Jefferies Franchise Picks

Jefferies Franchise Picks include stock selections from among the best stock ideas from our equity analysts over a 12 month period. Stock selection
is based on fundamental analysis and may take into account other factors such as analyst conviction, differentiated analysis, a favorable risk/reward
ratio and investment themes that Jefferies analysts are recommending. Jefferies Franchise Picks will include only Buy rated stocks and the number
can vary depending on analyst recommendations for inclusion. Stocks will be added as new opportunities arise and removed when the reason for
inclusion changes, the stock has met its desired return, if it is no longer rated Buy and/or if it triggers a stop loss. Stocks having 120 day volatility in
the bottom quartile of S&P stocks will continue to have a 15% stop loss, and the remainder will have a 20% stop. Franchise Picks are not intended
to represent a recommended portfolio of stocks and is not sector based, but we may note where we believe a Pick falls within an investment style
such as growth or value.
Risks which may impede the achievement of our Price Target

This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the financial
instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based upon their
specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance of the financial
instruments recommended in this report should not be taken as an indication or guarantee of future results. The price, value of, and income from,
any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financial and political
factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates may adversely affect
the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities such as ADRs, whose
values are affected by the currency of the underlying security, effectively assume currency risk.
Rating and Price Target History for: Amazon.com, Inc (AMZN) as of 04-02-2019
04/29/2016 BUY:$865 07/29/2016 BUY:$950 02/03/2017 BUY:$975 04/28/2017 BUY:$1150 07/28/2017 BUY:$1250 10/27/2017 BUY:$1350 01/08/2018 BUY:$1450
2,500
2,000
1,500
1,000
500
Q1 Q2 Q3 2017 Q1 Q2 Q3 2018 Q1 Q2 Q3 2019 Q1
02/02/2018 BUY:$1750 03/13/2018 BUY:$1850 04/27/2018 BUY:$1950 07/27/2018 BUY:$2185 09/25/2018 BUY:$2350 10/23/2018 BUY:$2260 10/26/2018 BUY:$2300
Steven DeSanctis owns shares of Amazon.com common shares.
Notes: Each box in the Rating and Price Target History chart above represents actions over the past three years in which an analyst initiated on a
company, made a change to a rating or price target of a company or discontinued coverage of a company.
Legend:
I: Initiating Coverage
D: Dropped Coverage
B: Buy
H: Hold
UP: Underperform
For Important Disclosure information on companies recommended in this report, please visit our website at https://javatar.bluematrix.com/sellside/
Disclosures.action or call 212.284.2300.

AMZN
Company Update
April 3, 2019
Distribution of Ratings
IB Serv./Past 12 Mos. JIL Mkt Serv./Past 12
Mos.
Rating Count Percent Count Percent Count Percent
BUY 1156 54.84% 98 8.48% 15 1.30%
HOLD 809 38.38% 10 1.24% 1 0.12%
UNDERPERFORM 143 6.78% 1 0.70% 0 0.00%

AMZN
Company Update
April 3, 2019
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AMZN
Company Update
April 3, 2019
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Company Update

USA | Technology | Internet April 3, 2019

Amazon.com, Inc (AMZN) BUY

EQUITY RESEARCH AMERICAS

potential value of $3,000 in 2 years. Market Data

■ Our analysis is based on relatively conservative assumptions, particularly about growth

EBITDA (MM) -- 20,014.0 -- 33,476.0 -- 42,153.2 -- 57,579.2

Sep -- 0.52 -- 5.75 -- 6.44 -- --

^Prior trading day's closing price unless otherwise

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page 2 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Please see important disclosure information on pages 54 - 58 of this report.

US Equity Research | April 2019

Internet & Interactive Entertainment

Amazon Deep Dive: 212.284.2491

Sum of the Parts Suggests

Upside to $3,000 by 2021 John Byun

Please see important disclosure information on pages 54 - 58 of this report.

Amazon – Potential for $3,000 Stock in 2 Years, ~65% Upside

page 4 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Please see important disclosure information on pages 54 - 58 of this report.

Amazon – We See Material Upside Despite Embedded Conservatism

Multiple 2022E Rev 2018-22 Firm Value Per % of

Source: Jefferies estimates

page 5 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Please see important disclosure information on pages 54 - 58 of this report.

Amazon – Fastest Growing Segments Are the Most Profitable

Advertising 9.1 ~15% 38%

page 6 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Please see important disclosure information on pages 54 - 58 of this report.

Amazon – New Initiatives Present Further Upside

page 7 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Please see important disclosure information on pages 54 - 58 of this report.

Amazon – What’s the TAM of the World?!?

Smart speaker: $13B

Logistics: $15T Global Retail: $27T

Theatrical & Home

Trucking: $725B US Grocery: $780B

Parcel Delivery: $300B Global Apparel: $3T US Restaurant: $540B

Please see important disclosure information on pages 54 - 58 of this report.

Amazon – Top Large Cap Internet Stock with Plenty of Upside

AMZN Stock Performance vs. NASDAQ

page 9 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Please see important disclosure information on pages 54 - 58 of this report.

page 10 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Please see important disclosure information on pages 54 - 58 of this report.

AWS – Revenue Growth Engine and Margin Booster

Revenue ($M) EBITDA ($M)

5.5x $325,542 $403,673 $492,481 11.0x $365,445 $452,345 $550,876

Please see important disclosure information on pages 54 - 58 of this report.

AWS – Revenue Growth Engine and Margin Booster

 12 new Availability Zones across 4 AWS regions (Bahrain, South

Please see important disclosure information on pages 54 - 58 of this report.

AWS – Revenue Growth Engine and Margin Booster

70 31% $73B 32%

Revenue Op Inc Margin

Please see important disclosure information on pages 54 - 58 of this report.

AWS – Revenue Growth Engine and Margin Booster

AWS MSFT Azure GCP AWS MSFT Azure GCP

page 14 of 58 Brent Thill, Equity Analyst, (415) 229-1559, bthill@jefferies.com

Please see important disclosure information on pages 54 - 58 of this report.

AWS – Revenue Growth Engine and Margin Booster

Infrastructure Platform Applications

Source: Company reports