Amazon: Margins Aren’t What They Seem As Debt Risk Grows


  • Phenomenal growth and growing margins make a strong investment narrative for the retailing giant, but dig a little deeper and there is more to Amazon’s story.
  • Underlying cash profitability for Amazon is inconsistent and sometimes negative, and its skinny margins make the firm sensitive to financing operations.
  • We explore how bond traders currently view Amazon to get a sense of how risky the long-term debt issuances are seen to be.
  • While Amazon is a well-run firm, investors should note bond pricing of Amazon as higher-risk than typical AAA-rated bonds, and the scale of debt being issued.
  • Prices, yields, financials all accurate as at 28th January 2023.

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Julie Clopper/iStock Editorial via Getty Images

Amazon’s (NASDAQ:AMZN) growth story is undeniably nothing short of phenomenal, and the retailing giant has worked hard to fund and manage this growth carefully.

Browsing the firm’s financials, both operating margins & gross margins have grown consistently

Graph of Amazon's profitability across EBIT, Operating Income, Gross Margins and Cash Profit


A screenshot of AMZN's financial health metrics


A screenshot of AMZN corporate bonds on offer


A gaph of the US 10 year treasury yield

A screenshot of the Moody's AAA corporate bond yield

A screenshot from FINRA showcasing AMZN bond yields


A screenshot of Amazon's debt issuances in the last 10 years.

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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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