Running head: AMAZON 1

Amazon: Risk or Reward?

Madison Bidwell

Arizona State University

OGL 260-Module 03

March 28, 2022

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Amazon

Millions of people take advantage of Amazons many services, from online ordering, quick deliv-

ery, Prime Video, e books and so much more. Thanks to technology, life as we know it keeps

getting more and more convenient. Amazon was founded in 1994 in a Bellevue, WA garage by

Jeff Bezos. The name “Amazon” was chosen based off of “A” being the first letter in the alpha-

bet and the vast South American river. While Amazon.com famously started as a bookseller, Be-

zos contended from its start that the site was not merely a retailer of consumer products. He ar-

gued that Amazon.com was a technology company whose business was simplifying online trans-

actions for consumers. (Hall,2022, p.5) I think the vision has come to life.

With so many services Amazon has to offer, it is a no brainer that this company could be

on your list of companies to invest in and add to your portfolio. With any company though, re-

search is crucial to determine the risk and return associated with your investment. The Risk

Score is a relevant measure for the assessment of a stock attractiveness. 0 corresponds to a very

high risk and 10 corresponds to a very low risk. Amazon.com Inc. shows a Risk Score of 7.00.

(Analytics, I, 2022, p. 1) With Amazon having a Risk Score of 7, this seems like a stable com-

pany to invest in.

Cash flows are the expected returns and benefits that the investment generates. Cash

Flow, not accounting profit, is the relevant variable the financial manager uses to measure re-

turns. (Keown,2020, p.189) Looking at the chart below, you can see that Amazons cash flow

from operating activities for the year 2019 and 2020 both had an increase of 25.36% and

71.53%. This last year 2021 is not looking as great on the graph, there was a decrease 28.59%.

This is no reason to worry and sell those stocks though, many factors are involved.
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Amazons paid a $11.8 pretax, non-operating gain for their ownership in RIVIAN com-

mon stock. Unfortunately, the beginning of this year RIVIAN stock has tumbled. Despite man-

agement's focus on cash flow and operating income, we find free cash flow went negative, while

operating income increased just 8.7 percent. Net sales rose. (Merola, 2022, p.8) Pressure from

COVID-19 productivity and inflationary pressures ended in ~$6 billion worth of losses for the

company. Despite all the obstacles, Amazon is not in a decline at all. Drilling a bit deeper, we

find last year's working capital movement had a material effect on cash flow. In 2021, Amazon

consumed significant cash as a result of building $9.5 billion inventory. In addition, receivables

increased by $18.1 billion. (Merola,2022, p.21)

If you have 3,300.69 laying around, then you could buy one Amazon stock. Over this

past year amazon stock has bounced around 3,000 to 3,700 dollars. Like any investment there

will be fluctuation, so hold and ride the wave.

Amazon is not going anywhere; I myself have noticed expansion in Ohio. There are two

massive Amazon warehouses by my house and countless delivery vehicles on the road. My fam-

ily and friends are receiving daily packages and there is even an Amazon store being built near

my town. Investors who bought Amazon in the past have done very well, but if the past two

years have taught investors anything, it’s that anything can happen, and you may not see it com-

ing. (Doyle 2022, p.9) This company overcomes obstacles and is not going anywhere soon; it

keeps expanding and could be a great addition to any investor’s portfolio.

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Amazon Cash Flow from Operating Activities 2010-2021 | AMZN.

Cash Flow, A. (n.d.). Amazon cash flow from operating activities 2010-2021: AMZN. Macrotrends. Retrieved March 30, 2022, from

https://www.macrotrends.net/stocks/charts/AMZN/amazon/cash-flow-from-operating-activities
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References

Analytics, I. (2022). Amazon.com Inc.. InfrontAnalytics. Retrieved March 30, 2022, from

https://www.infrontanalytics.com/fe-EN/31195NU/Amazon-com-Inc-/gprv-risk

Cash Flow, A. (n.d.). Amazon cash flow from operating activities 2010-2021: AMZN.

Macrotrends. Retrieved March 30, 2022, from https://www.macrotrends.net/stocks/charts/

AMZN/amazon/cash-flow-from-operating-activities

Doyle, K. (2022, February 15). Amazon Stock: Is it a good buy right now? GOBankingRates. Re-

trieved March 30, 2022, from https://www.gobankingrates.com/investing/stocks/amazon-

stock-is-it-buy-now/

Hall, M. (2022). Amazon.com. Encyclopædia Britannica. Retrieved March 30, 2022, from

https://www.britannica.com/topic/Amazoncom

Keown, A. J., Martin, J. D., & Petty, J. W. (2020). Foundations of Finance, (10th ed.). New York,

NY: Pearson.

Merola, R. (2022, February 9). Sifting Amazon's Cash Flow: There's A Story to Be Told.

SeekingAlpha. Retrieved March 31, 2022, from https://seekingalpha.com/article/4485372-

amazon-cash-flow-q4-earnings-insight