Amazon.com Inc. (
AMZN
), the world's largest online retailer has recently announced a
public offering of bonds aggregating $3 billion. These bonds have
been issued in three tranches of different amounts, with varying
coupon rates and maturities.
The first tranch of $750 million carries a coupon rate of
0.65% and will mature in 2015. The second tranch of 1 billion,
with a coupon rate of 1.2%, will mature in 5 years and the third
portion of $1.25 billion carrying a coupon rate of 2.5% will
mature in 10 years.
The 0.65% securities will yield 38 basis points more than
similar securities in the market; the 1.2% securities will yield
63 basis points while the 2.5% notes will yield 93 basis points
more than benchmarks.
Amazon stated that the transaction proceeds will be used for
general corporate purposes and to fund a part of the $1.16
billion real-estate transaction.
Last month, Amazon had announced its intention to purchase its
corporate headquarters in the South Lake Union neighborhood for
$1.16 billion from Vulcan Inc., the investment firm of Microsoft
co-founder Paul Allen. The company expects to complete the entire
real estate transaction by the end of the fourth quarter.
Amazon is one of the leading players in the extremely
fast-growing retail ecommerce market and its strength lies in its
huge scale of offerings, its broad reach and platform approach.
Amazon has limited debt and $5.25 billion in cash on its balance
sheet.
We believe Amazon's strong balance sheet helps the company to
capitalize on investment opportunities and strategic
acquisitions, thereby further improving growth visibility. Going
forward, we believe the company will continue to experience
strong growth.
However, at the same time, we think that there is a certain
amount of uncertainty regarding Amazon's investment plans, which
could pressure earnings in the near term. In the recently
reported third quarter, the company suffered a huge loss of 60
cents due to its investment focus. The company is making heavy
investments in its Kindle tablet computers, new warehouse and
data centers, which will continue to weigh on its near-term
results.
Amazon currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating.
At the moment, however, most of Amazon's competition (whether
direct or indirect) continues to come from
eBay Inc.
(
EBAY
) and
Barnes & Noble, Inc
. (
BKS
), which retain a Zacks #2 Rank equivalent to a short-term Buy
rating, while
Google
(
GOOG
), carries a Zacks #3 Rank (short-term Hold rating).
AMAZON.COM INC (AMZN): Free Stock Analysis
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