Internet Media

Victor Anthony
646-502-2452
VAnthony@aegiscap.com

Initiating Coverage
January 20, 2017
Key Metrics Amazon.com, Inc.
Rating: Buy
AMZN - NASDAQ $809.04
Pricing Date Jan 19 2017
$953.00
Sustained Solid Top-line Growth, With LT Margin
Price Target
52-Week Range $847.21 - $474.00
Shares Outstanding (mm) 496.0 Expansion & FCF Growth; Initiating At Buy.
Market Capitalization (mm) $401,283.8
3-Mo Average Daily Volume 4,298,391 Investment Highlights:
Book Value/Share $28.42
Price/Book 28.5x We are initiating coverage of Amazon.com with a Buy rating and a $953 price target
for year-end 2017. An investment in Amazon today is a bet that: a) Amazon will
EPS FY: December continue to take share of retail sales, Prime will continue to add subscribers, and
Prior Curr. Prior Curr. retail top-line growth will continue in the high-teen to low-20% range; b) AWS will
2015A 2016E 2016E 2017E 2017E continue to grow at a healthy pace, and margins continue to expand, despite rising
1Q-Mar (0.12) -- 1.07A -- 1.49E competition; c) overall company margins will expand despite aggressive investments
in digital content, infrastructure, India and others; and d) the current valuation will
2Q-Jun 0.19 -- 1.77A -- 2.45E
withstand potential macro shocks as well as quarterly variations in earnings versus
3Q-Sep 0.17 -- 0.52A -- 1.28E
consensus. We see a, b, and c as highly likely over the next two years, while d, if it
4Q-Dec 1.00 -- 1.39E -- 2.07E were to occur, would present buying opportunities.
FY 1.25 -- 4.75E -- 7.30E
Expecting +20% Top-Line Growth Over The Next Two Years. We expect
P/E NM NM NM
GAAP EPS Amazons investments in Prime, infrastructure, devices, digital content, AI, and
newer areas such as groceries, efforts with CPG and in categories such as apparel,
REVENUE to strengthen its competitive moat and allow it to continue to take share from
Prior Curr. Prior Curr. traditional retail. AWS for its part, given its early lead, and competitive strengths,
2015A 2016E 2016E 2017E 2017E and investment in infrastructure and innovation, should continue to grow its
1Q-Mar 22,717.0 -- 29,128.0A -- 35,981.1E revenues at a fast rate. The combination of the core and AWS should allow
2Q-Jun 23,185.0 -- 30,404.0A -- 37,367.5E
Amazon to grow its top line at a 22% CAGR over the next two years.
3Q-Sep 25,358.0 -- 32,714.0A -- 39,933.9E
Deep Dive Into Margin Levers We See Margins Expanding Over The Next
4Q-Dec 35,747.0 -- 44,782.7E -- 54,956.1E
Two Years. 2017 is likely to see a continuation of the stepped-up investments in
FY 107,007.0 --137,028.7E --168,238.6E
the back half of 2016, although at a slower pace. Amazon is investing aggressively
in video content, fulfillment, India, devices, AWS, and add-on services like
Company Description:
Amazon.com is one of the largest e-commerce companies in the world.
Amazon Fresh and Prime Now, logistics, and experimental services such as
The company was incorporated in 1994, went live in July 1995, and Amazon Go. Those investments, particularly for video content and fulfillment
become a public company in 1997. Amazon operates principally via center builds, put pressure on retail CSOI margins in 3Q16. We are projecting a
three business models: core retail sales from Amazon.com, third- further, steeper decline in margins in 4Q16. However, while in past investment
party seller programs, and Amazon Web Services (AWS). Amazon also years we have seen margins degrade for a sustained period, we expect overall
owns the Kindle device manufacturing business and Amazon Prime
Video. Amazon has physical operations in the U.S., Canada, the U.K,
margins to expand at a measured pace over the next two years. Our confidence
Germany, France, Japan, China, Italy, Spain, and India. comes from a deep dive into Amazon's margin levers.

Free Cash Continues To Build. Along with margin expansion, we expect free
cash flow per-share to continue to increase. We estimate that free cash flow per-
share will grow at an 18% CAGR from $18.09 per share in 2016 to $25.27 per-
share in 2018.

Valuation: We value Amazon using a sum-of-the-parts analysis, in which we

apply a 1.5x multiple to our 2018 retail revenue estimate and a 12x multiple to our
2018 AWS EBITDA estimate. After adjusting for cash & equivalents and debt,
we arrive at a per share value of $953 for year-end 2017, for expected upside of
18%. Amazons shares trade at 2.3x our 2017 sales, 21x EV/EBITDA and 71x our
Adjusted EPS. Except for P/S, AMZN is trading at a premium to peers. It is worth
noting, however, that Amazons gross product sales are only 1% of global
retail sales. It is also worth noting that Amazons market capitalization as a
percent of its >$5T market opportunity is only 7%, versus 57% for Facebook
and 94% for Alphabet.

The Disclosure section may be found on pages 19 - 20 of this report.

Amazon.com, Inc. January 20, 2017

Company Description
Amazon.com is one of the largest e-commerce companies in the world. The company was incorporated in 1994, went live in
July 1995, and become a public company in 1997. Amazon operates principally via three business models: core retail sales
from Amazon.com, third-party seller programs, and Amazon Web Services (AWS). Amazon also owns the Kindle device
manufacturing business and Amazon Prime Video. Amazon has physical operations in the U.S., Canada, the U.K, Germany,
France, Japan, China, Italy, Spain, and India.

Investment Thesis
We are initiating coverage of Amazon.com with a Buy rating and a $953 price target for year-end 2017, for expected upside
of ~18%. An investment in Amazon today is a bet that: a) Amazon will continue to take share of retail sales, Prime
will continue to add subscribers, and retail top-line growth will continue in the high-teen to low-20% range; b)
AWS will continue to grow at a healthy pace, and margins continue to expand, despite rising competition; c)
overall company margins will expand despite aggressive investments in digital content, infrastructure, India
and others; and d) the current valuation will withstand potential macro shocks as well as quarterly variations
in earnings versus consensus. We see a, b, and c as highly likely over the next two years, while d, if it were
to occur, would present buying opportunities. It is worth noting that Amazons gross product sales are only 1% of global
retail sales. It is also worth noting that Amazons market capitalization as a percent of its >$5T market opportunity is only 7%
versus 57% for Facebook and 94% for Alphabet.

Expecting +20% Top-Line Growth Over The Next Two Years. We expect Amazons core investments in Prime, infrastructure,
devices, content, AI, and newer areas such as groceries, efforts with CPG and in categories such as apparel, to strengthen its
competitive moat and allow it to continue to take share from traditional retail. AWS for its part, given its early lead, and
competitive strengths, and investment in infrastructure and innovation, should continue to grow its revenues at a fast rate.
The combination of the core and AWS should allow Amazon to grow its top line at a 22% CAGR over the next two years.

Retail Taking Share Growing Revenues At A +20% 2-Year CAGR. Amazons retail value proposition a
combination of selection, low prices, convenience, Prime, product reviews, and customer service continues to
resonate well with consumers who are increasingly using the site as their first stop for retail search. That proposition
continues to drive spend per customer. As a result, we expect Amazon to continue to take share of retail commerce
in most markets where it operates. Prime, which we estimate at close to 60 million members today, continues to be
a key success factor, giving Amazon a competitive advantage against both online and offline retailers. The video
content with Prime Video and, to a lesser extent, music, has served as a strong Prime customer acquisition tool. We
remain skeptical of the Chinese opportunity given the presence of several entrenched players, but India looks like a
greenfield opportunity for Amazon, and Amazon is seeing early successes there despite the rising competition in
that market. Amazons success with the Echo/Alexa devices should also contribute to the top-line growth rate over
the next two years. These products have reportedly been a hit with consumers. We model the core retail platform
growing revenues at a 22% CAGR from 2016 to 2018 as a result of these growth levers.

Our confidence in Amazon continuing to take retail share, in addition to the above, is further strengthened by the
spate of recent traditional retail store closings. From Sears, to Macys to Office Depot, hundreds of store closings
have been announced. J.C. Pennys CEO also announced that he expects store closings this year. This is a circle that
continues to benefit Amazon because we believe Internet sales, including by Amazon, are leading to these store
closings, and that the sales from these closed locations will eventually make their way online, benefiting Amazon.

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Exhibit 1. Recent Traditional Retail Announced Store Closings

350
300
300
250 250
250
200
150
150 120 124
108 110
100 68 70
42
50 25
0

Source: Company Reports; Aegis Capital

The below exhibit from Bloomberg further illustrates a trend we expect to continue. Internet sales should continue
to take share of department store sales, and that trend could accelerate as Amazon gains more depth in the apparel
category.

Exhibit 2. Non-Store Retail Sales vs. Department Store Sales

Source: Bloomberg; Aegis Capital

The long-term bull case for Amazon is that it is still relatively under-penetrated in retail. Amazons gross product
sales (1P and 3P estimated sales, grossed up) represent only 1% of worldwide sales.

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Exhibit 3. Amazons Gross Product Sales as % of Worldwide Retail and Worldwide E-Commerce

16.0%

14.0% 13.5%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0% 1.1%

0.0%
Amazon Gross Product Sales % of WW Retail Sales Amazon Gross Product Sales % of WW E-Commerce

Source: eMarketer; Company Reports; Aegis Capital

AWS Sustains Leadership Growing Revenues At a 43% 2-Year CAGR. From our conversations with Amazon Web
Services (AWS) customers, we understand that Amazon provides immense value to them and switching costs are
high. So despite the rising competition, we expect greater usage by existing customers and growth of additional
customers to continue to support strong top-line growth for the segment. We are expecting revenue growth to slow
from the past two years but still expand at a healthy pace of 43% over the next two years, taking revenues from an
estimated $12.3B in 2016 to $25.1B in 2018. Amazon has been investing aggressively in the build-out of capacity and
in driving innovation, including Artificial Intelligence and Machine Learning. The scale and level of services resonates
with customers and developers. That was clearly evident at the last AWS re:Invent, where attendance increased 68%
to 32K from 19K in the prior year.

Exhibit 4. AWS Estimates

Period 2013 2014 2015 1Q16 2Q16 3Q16 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E
Revenue $3,108 $4,644 $7,880 $2,566 $2,886 $3,231 $3,680 $12,363 $3,849 $4,214 $4,620 $5,225 $17,908 $25,138
q/q % change 6.7% 12.5% 12.0% 13.9% -68.9% 9.5% 9.7% 13.1%
y/y % change 69.0% 49.4% 69.7% 63.9% 58.2% 55.0% 53.0% 56.9% 50.0% 46.0% 43.0% 42.0% 44.9% 40.4%
y/y % change, Ex-FX 0.0% 0.0% 0.0% 64.0% 58.0% 55.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
% of Amazon's Revenues 7.0% 9.1% 12.4% 15.1% 16.3% 17.1% 13.8% 15.4% 18.7% 19.6% 20.3% 16.3% 18.5% 21.8%

Segment operating expenses (Ex-SBC, Amort of Intangibles)

$2,435 $3,984 $6,016 $1,850 $2,023 $2,210 $2,610 $8,693 $2,756 $2,933 $3,137 $3,680 $12,506 $17,430
q/q % change 7.7% 9.4% 9.2% 18.1% -68.3% 6.4% 7.0% 17.3%
y/y % change 0.0% 63.6% 51.0% 42.2% 41.2% 41.3% 51.9% 44.5% 49.0% 45.0% 42.0% 41.0% 43.9% 39.4%
% of revenues 78.3% 85.8% 84.0% 72.1% 70.1% 68.4% 70.9% 70.3% 71.6% 69.6% 67.9% 70.4% 69.8% 69.3%

CSOI - Segment operating income (loss) $673 $660 $1,864 $716 $863 $1,021 $1,070 $3,670 $1,093 $1,281 $1,483 $1,545 $5,402 $7,708
q/q % change 4.2% 20.5% 18.3% 4.8% -70.2% 17.2% 15.8% 4.2%
y/y % change 0.0% -1.9% 182.4% 170.2% 120.7% 96.0% 55.7% 96.9% 52.7% 48.4% 45.3% 44.4% 47.2% 42.7%
y/y % change, Ex-FX 0.0% 0.0% 0.0% 161.0% 121.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Margins 21.7% 14.2% 23.7% 27.9% 29.9% 31.6% 29.1% 29.7% 28.4% 30.4% 32.1% 29.6% 30.2% 30.7%

Source: Company Reports; Aegis Capital Estimates

Margins Expanding While Investing For Continued Growth. 2017 is likely to see a continuation of the stepped-up
investments made in the back half of 2016, although at a slower pace. Amazon is investing aggressively in video content,
fulfillment, India, devices, AWS, and add-on services like Amazon Fresh and Prime Now, and experimental services such as
Amazon Go, its convenience store concept. The stepped-up investments, particularly for video content and fulfillment
center builds, have put pressure on retail CSOI margins, which came in at a lower level in 3Q16 than we have seen in several

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Amazon.com, Inc. January 20, 2017

quarters. It is worth noting that when Amazon invests aggressively in a particular area, in this instance video content and
fulfillment, they are likely seeing a strong market opportunity and are investing against that. Retail CSOI margin declined
800bps YoY to 1.2% in 3Q16, the first YoY decline since 1Q15. For reference, AWSs CSOI margin expanded 661bps in 3Q16.
We are projecting a further, steeper decline in 4Q16, with retail margin of 1.9%, down from 3.2% in 4Q15. However, while
in past investment years we have seen margins degrade (pro-forma margin declined from 5.7% in 2010 to 2.0% in 2014), we
expect both retail and overall margins to expand at a measured rate. The following table highlights the many investments
that Amazon is currently undertaking and our thoughts on their likely impact on margins. Taking all together, we expect the
margin-accretive investments to overcome margin pressures from others, leading to higher longer-term margins for
Amazon. Amazons stock has historically outperformed in periods of expanding margins.

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Exhibit 5. Amazons Investment Areas

Investments Areas Thoughts Impact To Margins
Digital Content Video content, in particular, doubled YoY in 2H16 - tripled the number of new Negative impact to gross margins. However, as spend growth decelerates, we
Amazon originals TV shows and movies, which can be used globally. We expect should see an uptick in gross margins.
spend to increase in 2017 due to the global expansion of Prime Video, with the
addition of local content in places like India. Video content increases the Prime
value proposition and Prime members who watch video churn less. Also included
here is music content spend which is likely increasing for Prime Music. Amazon last
reported spend of $1.3B on video content in 2014. We believe spend will exceed $4B
annually today.
India Amazon has said that India is their biggest single investment. India is 100% third- Negative impact to margins now given investment phase but longer-term
party, which are high margin sales; however, Amazon is in early stages of developing accretive due to 3P status.
that market so they are investing heavily in helping retailers sell on the platform.

Devices Echo and Alexa, FireTV, Tablets, e-Readers; Amazon is stepping-up hiring due to Amazon is likely selling the newer devices at a slight profit but they are
the popularity of the Echo/Alexa devices. Also Dash Buttons. nonetheless dilutive to margins.
Amazon Fresh Expanded to Northern Virginia, Maryland, Dallas and Chicago in 3Q16 and Likely unprofitable at this time. We wouldn't be surprised if Amazon scaled back
expanded to London. The customer value proposition is high but so are costs. the pace of expansion here.
Online grocery is only 2% of U.S. grocery sales so we see Amazon's ambitions there.

AWS AWS continues to grow at a fast pace despite rising competition and we see that Could fluctuate from quarter-to-quarter but we see a secular margin expansion
growth continuing due to AWS's strong competitive moat. Margins could be lumpy story here.
from quarter-to-quarter as Amazon invests in tools for customers and bring new
regions, Availability Zones, and Edge Locations online, and as they reduce pricing,
as they did in 3Q16. AWS added near 1K services in 2016 vs over 700 in 2015.
However, we expect continued margin expansion due scale benefits and leverage
on fixed expenses, the addition of high-margin services, higher asset utilization.

3P Market Sales Very high margin business (FBA fulfilled units does incur shipping costs). Third-party Positive to gross margins
unit sales were 50% of paid units, up from
Prime Shipping promotions plus the add ons like digital content (video, music, Kindle longer-term positive to margins due to added benefits
Lending Library, Prime Reading, Audible Channels) and others like Amazon Fresh
additional subscriptions, student programs, Prime Pantry, and unlimited Photo
storage. We still see room for Prime expansion in the U.S., where we estimate that
over 30M households have Prime. However, the real growth opportunity is outside
the U.S. Third-party units sales were 50% of paid units, up from 40% in 1Q14. We
expect the of greater 3P mix to continue for the foreseeable future and have a
positive impact to margins.
Apparel Category According to Amazon they are working with brands and manufacturers to sell on the High margin category so overall positive to margins
platform.
Fulfillment Amazon added 26 fulfillment centers in 2016 (18 in 3Q16), mostly in North America Pressure on margins in due to accelerating growth in 2016 as a result of jump in
to support unit growth, including from FBA. That was up from 14 in 2015 so we builds. Less pressure on margins in 2017 and even more so in 2018.
expect margin pressures as these centers get staffed. Amazon has announced 3
new fulfillment center builds thus far in 2017. As Amazon gets more efficiency out of
the fulfillment centers (they get more productive with each passing year), margins
should benefit - should see leverage on shipping and savings on fuel costs. In
addition, the newer fulfillment centers are likely operating at lower variable costs per
unit, so as they become bigger in terms of unit sales, margins should benefit. The
last time Amazon added double-digit capacity was in 2012 so we expect less added
capacity in 2017. Hence, in 2018 Amazon will have more productive centers
operating, which should benefit margins.
FBA FBA delivered more than 2B items worldwide in 2016 and FBA items shipped Mostly margin accretive
worldwide grew more than 50 percent year-over-year during the holiday season.
Sortation Centers Go betweens between Amazon's Fulfillment Centers and customers Likely putting pressure on margins
Prime Now Prime Now is in over 40 cites in 7 countries vs. 17 cities last year. Addresses Amazon is taking a margin hit on this service and will likely do so for sometime.
immediacy and items available in 1 to 2 hours. Adding restaurant delivery to Prime
Now in 19 metropolitan areas. The economics are challenging and Amazon has
admitted that Prime Now is a hard service to run profitably. The service is great for
customers but we question whether Prime Now will ever be profitable.
Physical Book Stores / Amazon Go Amazon has 3 physical book stores (Seattle, San Diego, Portland) with one planned Likely putting pressure on margins
in Boston and another in Chicago. Amazon recently announced the opening of
Amazon Go, a convenience store near its Seattle campus, that uses machine
learning and other technologies to allow purchases.
Artificial Intelligence and Machine Learning Used across both retail and AWS to create competitive moats Dilutive to margins now but additive longer-term
Logistics Planes, drones (Prime Air), ships and automobiles!!! - This is likely Amazons' 4th We will go with Amazon's comments for now, although we are hard-pressed to
pillar. Amazon has said that the air cargo leases do not negatively impact margins. see how that would be the case.
Source: Amazon; Aegis Capital

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We believe margins should expand for the following reasons:

Gross Margins Expanding. We are projecting gross margin expansion of 100bps in 2017 and 2018 due to increased
third-party sales, AWS accounting, and a greater mix of higher-margin categories, such as apparel and consumables,
which are growing faster than other categories at the moment. Further, we also see video content spend growing at
a slower pace in 2017 and 2018 than it did in 2016.

AWS Margins Expanding. While AWS continues to invest in bringing new regions, Availability Zones, and Edge
Locations online, and in new innovative tools, in addition to lower prices, we expect margins to continue to expand
due to scale benefits and leverage on fixed costs, the addition of high-margin services, and higher asset utilization.

Fulfillment. The growth rate of fulfillment accelerated in the first nine months of 2016 due to the additional capacity
(26 fulfillment centers added in 2016 up from 14 in 2015). The last time Amazon added double-digit fulfillment
center builds was in 2012, so we are not expecting another double-digit fulfillment center build in 2017. Therefore,
we model decelerating growth of fulfillment expenses in 2017 and then again in 2018. As Amazon gets more
efficiency out of the fulfillment centers (they get more productive with each passing year), margins should benefit.
We should see leverage on shipping and savings on fuel costs with centers closer to the customer. In addition, the
newer fulfillment centers are likely operating at lower variable costs per unit, so as they become bigger in terms of
unit sales, margins should benefit. Hence, in 2018 Amazon should have more productive centers operating, which
would benefit margins. Amazon has made three U.S. fulfillment center announcements thus far this year, possibly
opportunistically against the Trump narrative of keeping jobs in the U.S. We believe those announcements would
have been made at a later date under a different scenario.

Tech & Content. When Amazon reports 4Q16 results, we are likely to see that Tech & Content expense growth
decelerated for 2016 for the second consecutive year (+32% YoY vs. +33.6% YoY, ex-SBC), likely due to some
leverage on both core retail and AWS. We see that trend continuing over the next two years, +25% YoY in 2017 and
+20% in 2018.

Marketing & Sales Expenses Growth Rate Slowing. Marketing and sales expenses growth accelerated in each
quarter of 2016 (+35% YoY vs +24% YoY in 9mths of 2015) and we expect the same when Amazon reports 4Q16,
with the ramp to support the device sales and Prime Video originals. We see the growth rate slowing in 2017 (+27%
YoY) and 2018 (+19% YoY).

Taken together, we see all of the above factors leading to both retail and AWS pro-forma operating margin expansion in
2017 and 2018, and overall margin expansion in both years, although at a measured pace.

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Exhibit 6. Amazon: Core Retail & AWS Pro-forma Operating Margins (CSOI)
35.0%

30.2% 30.7%
29.7%
30.0%

25.0% 23.7%

20.0%

14.2%
15.0%

10.0%

5.0% 2.7% 3.3%

2.4% 2.5%
1.4%

0.0%
2014 2015 2016E 2017E 2018E

Retail Segment CSOI Margin AWS Segment CSOI Margin

Source: Company Reports; Aegis Estimates

Exhibit 7. Amazon: Total Company Pro-forma Operating Margin (CSOI)

8.0%

Investment Cycle Begins

7.0% 6.7%

6.0% 5.7%
5.4%
4.8%
5.0%
4.2%
4.0%
3.3%
2.7% 2.7%
3.0%
2.0%
2.0%

1.0%

0.0%
2010 2011 2012 2013 2014 2015 2016E 2017E 2018E

Proforma operating margin (CSOI)

Source: Company Reports; Aegis Estimates

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Free Cash Continues To Build. Along with margin expansion, we expect free cash flow per-share to continue to increase, also
at a measured pace. We estimate that capital expenditures will range between 4.5% and 5.0% over the next two years
leading free cash flow per share to grow at an 18% CAGR from $18.09 per share in 2016 to $25.27 per-share in 2018.

Exhibit 8. Free-cash-flow per-share

$30.15

$25.27
$25.15
$22.61

$20.15
$18.09
$19.91
$15.44
$15.15
$14.61

$10.15
$10.32
$10.00
$5.50
$4.55 $4.41 $4.18
$5.15

$0.86
$1.14
$0.15
2010 2011 2012 2013 2014 2015 2016E 2017E 2018E

FCF Per-Share FCF Per-Share, Less Lease Payments

Source: Company Reports; Aegis Estimates

Estimates
For 4Q16, we are estimating revenues of $44.783B (+25% YoY), slightly above the consensus of $44.675B, and GAAP EPS of
$1.39, in line with consensus. Our revenue estimate consists of North American growth of 23.8% YoY, International growth
of 22.4% YoY, and AWS growth of 53% YoY. We forecast CSOI margin of 4.2% and operating margin of 2.4%. We see Amazon
reporting results in line with our estimates for 4Q16. App traffic (downloads, MAU, DAUs) were strong in the quarter.

For 2017, we are estimating revenues of $168.24B (+22.8% YoY), slightly above the consensus of $168.16B, and GAAP EPS of
$7.30, below the consensus of $8.74. Our revenue estimate consists of North American growth of 20.8% YoY, International
growth of 20.3% YoY, and AWS growth of 44.9% YoY. We forecast CSOI margin of 5.4% (+56bps) and operating margin of
3.6%. Our estimates are conservative on the margins given our expectations for a heavy investment year in 2017.

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Exhibit 9. Aegis Estimates vs. Consensus

Item Aegis Estimate Consensus Variance % Variance Guidance
4Q16E
Revenues $44,783 $44,675 $108 0.2% $42.0 to $45.5 billion
EBITDA $4,013 $4,213 ($199)
Pro-Forma Oper Income (CSOI) $1,867
Non-GAAP EPS $2.48
GAAP EPS $1.39 $1.39

1Q17E
Revenues $35,981 $35,975 $6 0.0%
EBITDA $4,159 $4,395 ($237)
Pro-Forma Oper Income (CSOI) $1,948
Non-GAAP EPS $2.40
GAAP EPS $1.49 $1.66

2017E
Revenues $168,239 $168,161 $78 0.0%
EBITDA $18,349 $20,135 ($1,787)
Pro-Forma Oper Income (CSOI) $9,099
Non-GAAP EPS $11.41
GAAP EPS $7.30 $8.74

2018E
Revenues $203,671 $204,204 ($533) -0.3%
EBITDA $24,072 $26,516 ($2,443)
Pro-Forma Oper Income (CSOI) $13,662
Non-GAAP EPS $15.23
GAAP EPS $10.62 $14.87
Source: Aegis Capital; Company Reports

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Valuation $953 Price Target - ~18% Upside

We value Amazon using a sum-of-the-parts analysis, in which we apply a 1.5x multiple to our 2018 retail revenue estimate
and a 12x multiple to our 2018 AWS EBITDA estimate. After adjusting for cash & equivalents and debt, we arrive at a per
share value of $953 for year-end 2017, for expected upside of 18%.
Exhibit 2: Sum-of-The-Parts Valuation
2018 2018 % of per
Revenue EBITDA Multiple Enterprise Value Total EV Share

Retail, Method: Revenue $176,366 1.5x $263,667 57.0% $532

Other (Ad Rev,CC Fees), Method: Revenue $2,167 1.0x $2,167 0.5% $4
Total AMZN Retail & Other $178,533 $7,404 $265,834 57.5% $536

AWS, Method: EBITDA $25,138 $16,668 12x $196,687 42.5% $397

Total AMZN Enterprise Value $462,521
Add: Cash & Equivalents, Current $18,347 $37
Less: Debt ($8,205) ($17)
Equity Value $472,663
Diluted Shares 496.0
Fair Value per Share $953
Current Share price $810.61
Upside/(Downside) 18%
Source: Aegis Capital Estimates

Amazon is currently trading above its historical price-to-sales valuation and similarly above its average relative price-to-sales
to the S&P 500, but off its peak

Exhibit 10. Amazon: Historical P/S and P/S Relative to S&P500

Amazon: P/Sales Amazon: Relative P/Sales, to S&P500

2.9x 1.95x
2.0x
1.8x
2.4x
1.6x
1.4x 1.28x
1.9x
1.2x
1.4x 1.0x
0.8x 0.91x
0.9x
0.6x
0.4x 0.4x
10/1/2011

10/1/2012

10/1/2013

10/1/2014

10/1/2015

10/1/2016

10/1/2011

10/1/2012

10/1/2013

10/1/2014

10/1/2015

10/1/2016
1/1/2011
4/1/2011
7/1/2011

1/1/2012
4/1/2012
7/1/2012

1/1/2013
4/1/2013
7/1/2013

1/1/2014
4/1/2014
7/1/2014

1/1/2015
4/1/2015
7/1/2015

1/1/2016
4/1/2016
7/1/2016

1/1/2011
4/1/2011
7/1/2011

1/1/2012
4/1/2012
7/1/2012

1/1/2013
4/1/2013
7/1/2013

1/1/2014
4/1/2014
7/1/2014

1/1/2015
4/1/2015
7/1/2015

1/1/2016
4/1/2016
7/1/2016

P/Sales Average Relative Valuation Min Max Average

Source: FacetSet; Aegis Capital

Interestingly, and for both illustrative and comparison purposes, Amazons current market capitalization is only 7% of its
market opportunity (global retail sales and our rough estimate for AWSs market opportunity), compared to 57% for
Facebook and 94% for Alphabet. For this comparison, we rely on the $600B global advertising market for Facebook and

11 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Alphabet, and ignore Facebooks under-monetized opportunities outside of advertising (Messenger, WhatsApp, Oculus, e-
commerce) and Alphabets optimality on Other Bets.

Exhibit 11. Amazons Market Capitalization % of Market Opportunity vs Facebook & Alphabet

100% 94%
90%

80%

70%

60% 57%

50%

40%

30%

20%

10% 7%

0%
Amazon Facebook Alphabet

Source: eMarketer; Company Reports; Aegis Capital

Notes: For Amazon we use $4.9T global retail sales and assume $500B AWS market opportunity. Bezos has said that the
AWS market opportunity could be larger than retail and could be in the trillions of dollars.
Facebook and Alphabet's Market opportunity limited to $600B in annual global advertising, which is the super majoity of
their revenues.

12 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Amazons shares trade at 2.3x 2017 sales, 21x EV/EBITDA and 71x our Adjusted EPS (PEG of 1.5x). The shares are trading
below the e-commerce group on price-to-sales but above the group on EV/EBITDA and Adj. PE, reflective of Amazons heavy
investments.

Exhibit 12. Internet Comps

Price 52-Week 52-Week EV/Sales 2-Year EV/EBITDA PE, Adj Relative PE LT PEG FCF
Company Ticker 01/19/2017 @12:30PM ET High Low Mkt Cap($mil)EV ($mils) 2016E 2017E 2018E CAGR 2016E 2017E 2018E 2016E 2017E 2018E to S&P, '17 Gr rate '17 Yield, '17E
e-Commerce .
Amazon AMZN $810.31 $847.21 $474.00 $401,914 $391,772 2.9x 2.3x 1.9x 22% 26.8x 21.4x 16.3x 102.0x 71.0x 53.2x 4.1x 49% 1.5x 2.8%
Alibaba BABA $96.07 $109.87 $59.25 $233,467 $188,646 9.4x 6.9x 5.4x 32% 19.9x 15.2x 12.0x 31.6x 24.2x 19.1x 1.4x 30% 0.8x 4.0%
eBay EBAY $30.58 $33.19 $21.52 $34,238 $31,303 3.5x 3.4x 3.2x 5% 9.1x 8.3x 7.5x 16.3x 14.1x 12.1x 0.8x 14% 1.0x 8.2%
Cimpress CMPR $94.53 $104.18 $67.89 $3,089 $3,707 1.9x 1.7x 1.6x 10% 13.3x 12.7x 11.5x 39.4x 32.0x 26.6x 1.8x NM NM 3.1%
Shutterfly SFLY $53.23 $54.60 $35.91 $1,812 $1,978 1.7x 1.6x 1.5x 8% 8.9x 7.6x 6.9x 74.2x 40.8x 33.0x 2.3x 35% 1.2x 7.6%
PayPal PYPL $41.34 $44.52 $30.52 $49,883 $44,795 4.1x 3.5x 3.0x 17% 16.3x 14.2x 12.4x 38.8x 23.9x 20.4x 1.4x 17% 1.4x 0.0%
Mercadolibre MELI $174.89 $193.58 $84.19 $7,723 $7,557 9.0x 6.8x 5.3x 31% 35.9x 27.5x 20.7x 58.0x 42.5x 32.9x 2.4x 26% 1.7x 2.3%
Etsy ETSY $12.68 $16.05 $6.04 $1,465 $1,262 3.5x 2.8x 2.4x 22% 22.4x 16.8x 12.3x NM 99.2x 43.9x 5.7x 10% 9.9x 2.3%
Wayfair W $40.35 $49.34 $27.60 $1,995 $1,731 0.5x 0.4x 0.3x 28% NM NM NM NM NM NM NM NM NM 0.2%
GrubHub GRUB $39.18 $44.58 $17.77 $3,354 $3,057 6.2x 4.9x 4.1x 23% 21.1x 16.5x 13.2x 43.0x 33.9x 27.4x 1.9x 20% 1.7x 3.2%
Average 4.3x 3.4x 2.9x 20% 19.3x 15.6x 12.5x 50.4x 42.4x 29.8x 2.4x 25% 2.4x 3.4%
Median 3.5x 3.1x 2.7x 22% 19.9x 15.2x 12.3x 41.2x 33.9x 27.4x 1.9x 23% 1.4x 3.0%

Online Media
Alphabet GOOGL $827.22 $839.00 $672.66 $564,802 $485,684 6.7x 5.7x 4.9x 16% 13.4x 11.5x 9.9x 23.9x 20.1x 16.6x 1.2x 19% 1.0x 4.0%
Facebook FB $127.95 $133.50 $89.37 $368,193 $342,053 12.5x 9.3x 7.4x 30% 18.7x 15.3x 11.7x 31.1x 30.0x 23.0x 1.7x 25% 1.2x 2.8%
Twitter TWTR $16.88 $25.25 $13.73 $12,163 $10,153 4.0x 3.7x 3.3x 9% 14.2x 12.9x 11.1x 32.5x 30.3x 23.3x 1.7x 19% 1.6x 1.0%
IAC IACI $70.89 $71.48 $38.82 $5,785 $5,931 1.9x 1.8x 1.7x 7% 11.9x 9.7x 8.3x 28.7x 22.5x 16.4x 1.3x 36% 0.6x 4.9%
Match Group MTCH $18.36 $19.74 $8.41 $5,025 $6,010 4.9x 4.3x 3.9x 13% 15.0x 12.8x 11.2x 25.5x 23.9x 20.1x 1.4x 15% 1.6x 4.1%
Bankrate RATE $11.28 $12.93 $6.59 $1,016 $1,176 2.7x 2.4x 2.2x 10% 10.2x 9.5x 8.6x 13.3x 16.4x 13.7x 0.9x 10% 1.6x 9.0%
Zillow ZG $37.36 $39.99 $16.46 $2,020 $1,806 2.1x 1.7x 1.5x 21% 12.9x 7.6x 5.5x 43.9x 62.7x 41.5x 3.6x 15% 4.2x 8.5%
Yahoo! YHOO $42.13 $44.92 $26.15 $40,197 $10,354 3.0x 3.0x 3.0x 0% 12.6x 12.0x 11.7x 38.8x 65.5x 64.5x 3.7x 5% 13.1x 0.9%
XO Group XOXO $19.14 $20.99 $13.64 $507 $404 2.7x 2.4x 2.2x 10% 12.8x 11.4x 9.5x 48.1x 38.4x 29.7x 2.2x 25% 1.5x 5.9%
Groupon GRPN $3.51 $5.94 $2.15 $2,005 $1,545 0.5x 0.5x 0.5x 4% 9.8x 7.0x 5.5x NM 35.8x 20.7x 2.0x 38% 1.0x 4.2%
Zynga ZNGA $2.64 $3.08 $1.78 $2,047 $1,174 1.6x 1.4x 1.3x 10% 20.1x 10.3x 7.6x 103.7x 37.5x 25.5x 2.1x 30% 1.3x 5.3%
Pandora P $13.10 $14.98 $7.10 $3,343 $3,431 2.5x 2.0x 1.5x 28% NM NM NM NM NM NM NM NM NM NM
Netflix NFLX $139.64 $143.46 $79.95 $61,811 $62,868 7.1x 5.7x 5.1x 18% 104.0x 60.7x 40.8x 201.4x 137.1x 84.5x 7.8x 43% 3.2x NM
Yelp YELP $40.84 $43.36 $14.53 $3,341 $2,908 4.1x 3.2x 2.7x 23% 24.8x 16.8x 12.7x 51.7x 33.1x 26.1x 1.9x 31% 1.1x 0.0x
WebMD WBMD $50.30 $67.55 $45.46 $1,870 $1,876 2.7x 2.5x 2.4x 6% 8.2x 7.6x 7.1x 50.3x 25.2x 24.2x 1.4x 13% 2.0x 7.1%
Average 3.9x 3.3x 2.9x 14% 20.6x 14.7x 11.5x 53.3x 41.3x 30.7x 2.4x 23% 2.5x 4.7%
Median 2.7x 2.5x 2.4x 10% 13.1x 11.5x 9.7x 38.8x 31.7x 23.7x 1.8x 22% 1.5x 4.2%

Online Travel
Priceline PCLN $1,026.74 $1,600.93 $954.02 $50,749 $53,712 5.0x 4.3x 3.8x 15% 13.1x 11.3x 9.8x 16.0x 13.9x 12.1x 0.8x 16% 0.9x 7.5%
Expedia EXPE $85.84 $133.55 $88.40 $12,879 $14,179 1.6x 1.4x 1.2x 14% 8.7x 7.3x 6.1x 18.2x 14.2x 11.4x 0.8x 19% 0.8x 9.7%
Trip Advisor TRIP $69.01 $72.46 $45.63 $10,052 $9,421 6.3x 5.7x 5.1x 11% 25.4x 24.3x 20.1x 44.8x 44.2x 36.7x 2.5x 12% 3.8x 3.0%
Average 4.3x 3.8x 3.4x 13% 15.8x 14.3x 12.0x 26.3x 24.1x 1.4x 15% 1.8x 6.7%
Median 5.0x 4.3x 3.8x 14% 13.1x 11.3x 9.8x 18.2x 14.2x 0.8x 16% 0.9x 7.5%

Video Commerce
QVC Group QVCA/B $19.17 $27.25 $17.88 $9,521 $12,826 1.2x 1.2x 1.1x 4% 6.7x 6.4x 6.0x 11.7x 17.1x 12.4x 1.0x 20% 0.9x 11.6%
HSN, Inc. HSNI $33.70 $55.87 $30.75 $1,759 $2,317 0.7x 0.6x 0.6x 2% 7.9x 7.5x 6.9x 20.6x 12.3x 11.2x 0.7x 4% 3.0x 7.8%
EVINE Live EVLV $1.16 $2.40 $0.41 $74 $120 0.2x 0.2x 0.2x 3% 14.5x 7.2x 5.1x NM NM NM NM 25% NM -2.2%
Average 0.7x 0.7x 0.6x 3% 9.7x 7.0x 6.0x 16.2x 14.7x 11.8x 0.8x 16% 1.9x 5.7%
Median 0.7x 0.6x 0.6x 3% 7.9x 7.2x 6.0x 16.2x 14.7x 11.8x 0.8x 20% 1.9x 7.8%

Apple AAPL $118.61 $120.50 $89.47 $623,630 $643,507 2.9x 2.8x 2.6x 6% 9.0x 8.7x 8.2x 14.0x 12.8x 11.7x 0.7x 8% 1.7x 10.5%

S&P 500 18.4x 17.5x

Source: Aegis Capital Estimates; FactSet Consensus

13 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Risks To Our Analysis

Rising competition for retail and AWS.
Key man risk Amazons future growth and strategic direction could be negatively impacted if Jeff Bezos were not able to
perform his duties as CEO.
Macro weakness could weigh on growth.
India could impose restrictions on foreign firms that, like China, could diminish Amazons competitive position.
Trump Effect new regulations (taxes, net neutrality) could negatively impact revenues and profits.

14 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Amazon.com, Income Statement (in $Millions, except per share data)

Period 2013 2014 2015 1Q16 2Q16 3Q16 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E
Media $10,808 $11,567 $12,483 $3,208 $2,928 $3,237 $4,245 $13,618 $3,465 $3,162 $3,480 $4,564 $14,671 $15,771
Electronics & Other GM $29,986 $38,517 $50,402 $13,511 $14,459 $15,327 $22,003 $65,300 $16,754 $17,929 $18,852 $27,063 $80,598 $97,768
Other $3,724 $750 $824 $277 $287 $310 $365 $1,239 $346 $359 $384 $449 $1,538 $1,852
Total North America $44,518 $50,834 $63,709 $16,996 $17,674 $18,874 $26,613 $80,157 $20,565 $21,450 $22,716 $32,076 $96,807 $115,391
y/y % change 27.9% 14.2% 25.3% 26.8% 28.1% 25.8% 23.8% 25.8% 21.0% 21.4% 20.4% 20.5% 20.8% 19.2%

Media $10,907 $10,938 $10,026 $2,480 $2,283 $2,491 $3,364 $10,618 $2,522 $2,260 $2,502 $3,532 $10,816 $11,024
Electronics & Other GM $18,817 $22,369 $25,195 $7,034 $7,504 $8,056 $11,055 $33,649 $8,983 $9,379 $10,024 $14,039 $42,425 $51,803
Other $211 $209 $197 $52 $57 $62 $71 $242 $62 $66 $71 $83 $282 $315
Total International $29,935 $33,516 $35,418 $9,566 $9,844 $10,609 $14,490 $44,509 $11,568 $11,704 $12,597 $17,655 $53,523 $63,142
y/y % change 13.9% 12.0% 5.7% 23.5% 30.1% 28.3% 22.4% 25.7% 20.9% 18.9% 18.7% 21.8% 20.3% 18.0%

AWS $3,108 $4,644 $7,880 $2,566 $2,886 $3,231 $3,680 $12,363 $3,849 $4,214 $4,620 $5,225 $17,908 $25,138
y/y % change 49.4% 69.7% 63.9% 58.2% 55.0% 53.0% 56.9% 50.0% 46.0% 43.0% 42.0% 44.9% 40.4%

Total Global Net Sales $74,453 $88,988 $107,007 $29,128 $30,404 $32,714 $44,783 $137,029 $35,981 $37,368 $39,934 $54,956 $168,239 $203,671
y/y % change 21.9% 19.5% 20.2% 28.2% 31.1% 29.0% 25.3% 28.1% 23.5% 22.9% 22.1% 22.7% 22.8% 21.1%

Total Cost of Sales $54,182 $62,752 $71,651 $18,866 $19,180 $21,260 $30,046 $89,352 $22,945 $23,199 $25,553 $36,322 $108,019 $128,733
Gross Profit 20,271 26,236 35,356 10,262 11,224 11,454 14,737 47,677 13,036 14,168 14,381 18,634 60,220 74,938
Gross Profit Margin % 27.2% 29.5% 33.0% 35.2% 36.9% 35.0% 32.9% 34.8% 36.2% 37.9% 36.0% 33.9% 35.8% 36.8%

Fulfillment $8,585 $10,766 $13,411 $3,687 $3,878 $4,335 $5,983 $17,883 $4,635 $4,771 $5,267 $7,333 $22,005 $26,392
Marketing & Sales $3,134 $4,332 $5,252 $1,436 $1,546 $1,738 $2,322 $7,042 $1,902 $1,954 $2,132 $2,950 $8,937 $10,595
Technology and Content $6,565 $9,275 $12,542 $3,526 $3,880 $4,135 $4,813 $16,354 $4,572 $4,748 $5,029 $5,995 $20,345 $24,310
General and administrative $1,128 $1,552 $1,747 $497 $580 $639 $511 $2,227 $616 $704 $776 $621 $2,717 $3,266
Other Operating Expenses $114 $133 $171 $45 $55 $32 $32 $164 $32 $32 $32 $32 $128 $128
Total Operating Expenses 73,708 88,810 104,774 28,057 29,119 32,139 43,707 133,022 34,701 35,407 38,789 53,253 162,151 193,423
y/y % change 22.0% 20.5% 18.0% 24.9% 28.2% 28.8% 26.2% 27.0% 23.7% 21.6% 20.7% 21.8% 21.9% 19.3%
% of Revenues 99.0% 99.8% 97.9% 96.3% 95.8% 98.2% 97.6% 97.1% 96.4% 94.8% 97.1% 96.9% 96.4% 95.0%

EBITDA, Adj $5,246 $6,553 $10,805 $3,487 $3,656 $3,467 $4,013 $14,609 $4,159 $4,732 $4,430 $5,028 $18,349 $24,072
y/y % change 37.1% 24.9% 64.9% 63.6% 41.8% 33.8% 14.6% 35.2% 19.3% 29.4% 27.8% 25.3% 25.6% 31.2%
EBITDA Margin 7.0% 7.4% 10.1% 12.0% 12.0% 10.6% 9.0% 10.7% 11.6% 12.7% 11.1% 9.1% 10.9% 11.8%

Depreciation & Amortization $3,253 $4,745 $6,281 $1,827 $1,909 $2,084 $2,147 $7,967 $2,211 $2,277 $2,346 $2,416 $9,250 $10,411

Pro Forma Operating Income (CSOI) $1,993 $1,808 $4,524 $1,660 $2,108 $1,383 $1,867 $6,643 $1,948 $2,455 $2,084 $2,612 $9,099 $13,662
y/y % change 19.5% -9.3% 150.2% 135.1% 96.1% 39.3% 6.7% 46.8% 17.3% 16.5% 50.7% 39.9% 37.0% 50.1%
Margin 2.7% 2.0% 4.2% 5.7% 6.9% 4.2% 4.2% 4.8% 5.4% 6.6% 5.2% 4.8% 5.4% 6.7%

Operating Income $745 $178 $2,233 $1,071 $1,285 $575 $1,075 $4,006 $1,280 $1,960 $1,145 $1,703 $6,088 $10,248
y/y % change 10.2% -76.1% 1154.5% 320.0% 176.9% 41.6% -2.9% 79.4% 19.5% 52.5% 99.1% 58.4% 52.0% 68.3%
Margin 1.0% 0.2% 2.1% 3.7% 4.2% 1.8% 2.4% 2.9% 3.6% 5.2% 2.9% 3.1% 3.6% 5.0%

Interest Income $38 $39 $49 $21 $24 $26 $17 $88 $21 $15 $16 $20 $72 $127
Interest Expense ($141) ($210) ($460) ($117) ($116) ($118) ($116) ($467) ($116) ($116) ($116) ($116) ($464) ($464)
Other Income (Expenses) ($136) ($119) ($254) $81 ($14) $8 $0 $75 $0 $0 $0 $0 $0 $0
Remeasurements and other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
PRETAX INCOME $506 ($112) $1,568 $1,056 $1,179 $491 $977 $3,703 $1,184 $1,859 $1,045 $1,608 $5,696 $9,911

Tax Rate % 29% 29% 29% 45% 26% 47% 30% 29% 30% 30% 30% 30% 29% 29%
Income Tax Expense (Benefit) $162 $167 $951 $475 $307 $229 $293 $1,304 $355 $558 $314 $482 $1,709 $2,973

Equity in Losses of Equity Method Investees ($71) $38 ($21) ($68) ($15) ($10) ($10) ($103) ($103) ($103) ($103) ($103) ($412) ($1,648)
Other (Amort of Goodwill, Acquisition charges, other) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
NET INCOME $273 ($241) $596 $513 $857 $252 $674 $2,296 $726 $1,198 $629 $1,022 $3,575 $5,290
y/y % change -782.5% -188.3% -347.3% -1000.0% 831.5% 219.0% 39.7% 285.2% 41.5% 39.8% 149.5% 51.8% 55.7% 48.0%

Basic Shares Outstanding 457 462 468 471 473 474 474 473 476 478 480 482 479 487
Diluted Shares Outstanding 461 466 475 481 483 485 485 484 487 489 491 493 490 498

Basic GAAP EPS $0.60 ($0.52) $1.27 $1.09 $1.81 $0.53 $1.42 $4.85 $1.53 $2.51 $1.31 $2.12 $7.46 $10.86
Fully Diluted GAAP EPS $0.59 -$0.52 $1.25 $1.07 $1.77 $0.52 $1.39 $4.75 $1.49 $2.45 $1.28 $2.07 $7.30 $10.62
y/y % change -781.0% -188.0% -340.5% -970.1% 818.0% 214.4% 38.6% 278.4% 39.8% 38.1% 146.4% 49.3% 53.7% 45.6%

Pro Forma EPS (Fully Diluted) $2.21 $4.54 $0.52 $1.69 $2.40 $1.37 $2.48 $7.94 $2.40 $3.11 $2.57 $3.32 $11.41 $15.23
y/y % change 213.4% 105.7% -88.6% -176.5% 372.9% 144.6% 50.3% 1441.3% 42.4% 29.8% 87.4% 33.6% 43.6% 33.5%
Source: Company Reports; Aegis Capital Estimates

15 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Amazon.com Free Cash Flow (in $Millions, except per share data)
Period 2013 2014 2015 1Q16 2Q16 3Q16 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E
TTM Free Cash Flow, TCM Calc
+ Cash from ops (SCF) $5,474 $6,841 $11,920 $11,259 $12,727 $14,603 $15,267 $15,267 $14,287 $15,123 $17,131 $18,649 $18,649 $21,749
- Capex ($3,443) ($4,892) ($4,588) ($4,896) ($5,394) ($6,040) ($6,522) ($6,522) ($6,962) ($6,933) ($6,889) ($7,571) ($7,571) ($9,165)
= Levered Free Cash Flow $2,031 $1,949 $7,332 $6,363 $7,333 $8,563 $8,745 $8,745 $7,325 $8,190 $10,242 $11,078 $11,078 $12,584
q/q % change -13.2% 15.2% 16.8% 2.1% -16.2% 11.8% 25.1% 8.2%
y/y % change 412.9% -4.0% 276.2% 101.3% 67.7% 58.6% 19.3% 19.3% 15.1% 11.7% 19.6% 26.7% 26.7% 13.6%
FCF % of EBITDA, Adjusted 38.7% 29.7% 67.9% 52.3% 55.4% 60.7% 59.8% 59.9% 27.9% 29.8% 36.7% 60.4% 60.4% 52.3%

TTM FCF per share $4.41 $4.18 $15.44 $13.23 $15.18 $17.66 $18.03 $18.09 $15.04 $16.75 $20.86 $22.47 $22.61 $25.27
q/q % change -13.2% 14.8% 16.3% 2.1% -16.6% 11.4% 24.5% 7.7%
y/y % change 411.8% -5.1% 269.1% 94.6% 65.3% 56.3% 18.3% 17.2% 13.7% 10.3% 18.1% 24.6% 25.0% 11.8%
LFCF/pro forma EPS % 199.8% 92.1% 2994.8% 299.9% 296.1% 248.2% 227.0% 227.7% 105.9% 105.0% 130.1% 196.9% 198.1% 165.9%

FCF Less Lease Principal repayments, TTM $1,251.00 $529.00 $4,748.00 $3,489.00 $3,925.00 $4,853.00 $4,989.70 $4,989.70 $3,419.29 $4,452.34 $6,506.21 $7,157.21 $7,157.21 $9,916.94
q/q % change 0.0% -26.5% 12.5% 23.6% 2.8% -31.5% 30.2% 46.1% 10.0%
y/y % change 0.0% -57.7% 797.5% 133.8% 64.5% 57.0% 5.1% 5.1% -2.0% 13.4% 34.1% 43.4% 43.4% 38.6%

FCF Per-Share Less Lease Obligations $1.14 $10.00 $7.25 $8.13 $10.01 $10.29 $10.32 $7.02 $9.10 $13.25 $14.52 $14.61 $19.91
q/q % change -26.5% 12.0% 23.1% 2.8% -31.8% 29.7% 45.5% 9.6%
y/y % change 0.0% 780.5% 126.1% 62.1% 54.7% 4.2% 3.2% -3.2% 12.0% 32.4% 41.1% 41.5% 36.3%

Source: Company Reports; Aegis Capital Estimates

AWS Estimates (in $Millions)

Period 2013 2014 2015 1Q16 2Q16 3Q16 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E
Revenue $3,108 $4,644 $7,880 $2,566 $2,886 $3,231 $3,680 $12,363 $3,849 $4,214 $4,620 $5,225 $17,908 $25,138
q/q % change 6.7% 12.5% 12.0% 13.9% -68.9% 9.5% 9.7% 13.1%
y/y % change 69.0% 49.4% 69.7% 63.9% 58.2% 55.0% 53.0% 56.9% 50.0% 46.0% 43.0% 42.0% 44.9% 40.4%
y/y % change, Ex-FX 0.0% 0.0% 0.0% 64.0% 58.0% 55.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
% of Revenues 7.0% 9.1% 12.4% 15.1% 16.3% 17.1% 13.8% 15.4% 18.7% 19.6% 20.3% 16.3% 18.5% 21.8%

Segment operating expenses (Ex-SBC, Amort of Intangibles)

$2,435 $3,984 $6,016 $1,850 $2,023 $2,210 $2,610 $8,693 $2,756 $2,933 $3,137 $3,680 $12,506 $17,430
q/q % change 7.7% 9.4% 9.2% 18.1% -68.3% 6.4% 7.0% 17.3%
y/y % change 0.0% 63.6% 51.0% 42.2% 41.2% 41.3% 51.9% 44.5% 49.0% 45.0% 42.0% 41.0% 43.9% 39.4%
% of revenues 78.3% 85.8% 84.0% 72.1% 70.1% 68.4% 70.9% 70.3% 71.6% 69.6% 67.9% 70.4% 69.8% 69.3%

CSOI - Segment operating income (loss) $673 $660 $1,864 $716 $863 $1,021 $1,070 $3,670 $1,093 $1,281 $1,483 $1,545 $5,402 $7,708
q/q % change 4.2% 20.5% 18.3% 4.8% -70.2% 17.2% 15.8% 4.2%
y/y % change 0.0% -1.9% 182.4% 170.2% 120.7% 96.0% 55.7% 96.9% 52.7% 48.4% 45.3% 44.4% 47.2% 42.7%
y/y % change, Ex-FX 0.0% 0.0% 0.0% 161.0% 121.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Margins 21.7% 14.2% 23.7% 27.9% 29.9% 31.6% 29.1% 29.7% 28.4% 30.4% 32.1% 29.6% 30.2% 30.7%

Source: Company Reports; Aegis Capital Estimates

16 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Amazon.com Balance Sheet (in $Millions, except per share data)

Period 2013 2014 2015 1Q16 2Q16 3Q16 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E
Cash, cash equivalents, and marketable securities: $12,447 $17,416 $19,808 $15,859 $16,540 $18,347 $25,237 $25,237 $19,497 $21,136 $24,853 $32,394 $32,394 $42,311
Inventories $7,411 $8,299 $10,243 $9,582 $9,588 $10,696 $12,644 $12,644 $12,164 $12,113 $13,423 $16,092 $16,092 $20,149
Accounts receivable, net and other current assets $4,767 $5,612 $6,423 $5,072 $6,092 $6,566 $8,047 $8,047 $7,065 $8,318 $8,903 $11,096 $11,096 $14,912
Deferred tax assets, current portion $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total current assets $24,625 $31,327 $36,474 $30,513 $32,220 $35,609 $45,927 $45,927 $38,726 $41,567 $47,179 $59,581 $59,581 $77,372

Fixed assets, net $10,949 $16,967 $21,838 $23,308 $25,190 $27,177 $26,822 $26,822 $26,230 $25,634 $25,086 $25,143 $25,143 $23,897
Deferred tax assets, long term portion $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Goodwill $2,655 $3,319 $3,759 $3,785 $3,774 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815
Other assets $1,930 $2,892 $3,373 $3,522 $3,892 $4,296 $4,296 $4,296 $4,296 $4,296 $4,296 $4,296 $4,296 $4,296
Total Assets $40,159 $54,505 $65,444 $61,128 $65,076 $70,897 $80,860 $80,860 $73,067 $75,312 $80,376 $92,835 $92,835 $109,380

Accounts payable $15,133 $16,459 $20,397 $14,990 $16,123 $18,801 $25,177 $25,177 $17,721 $18,986 $22,029 $29,629 $29,629 $34,366
Accrued expenses and other current liabilities $6,688 $9,807 $10,384 $9,431 $9,613 $10,497 $13,707 $13,707 $12,211 $12,398 $13,437 $17,679 $17,679 $22,441
Unearned revenue $1,159 $1,823 $3,118 $3,766 $3,851 $4,200 $3,906 $3,906 $4,652 $4,733 $5,127 $4,793 $4,793 $5,803
Interest payable $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current portion of long-term debt and other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total current liabilities $22,980 $28,089 $33,899 $28,187 $29,587 $33,498 $42,791 $42,791 $34,584 $36,117 $40,593 $52,102 $52,102 $62,610
Long-term debt $3,191 $8,265 $8,235 $8,219 $8,158 $8,205 $8,205 $8,205 $8,205 $8,205 $8,205 $8,205 $8,205 $8,205
Other Long-term liabilities $4,242 $7,410 $9,926 $9,966 $10,793 $11,412 $11,412 $11,412 $11,412 $11,412 $11,412 $11,412 $11,412 $11,412

Issued and outstanding shares $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5

Treasury Stock ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837) ($1,837)
Additional paid-in capital $9,573 $11,135 $13,394 $14,144 $15,026 $15,968 $15,964 $15,964 $15,652 $15,167 $15,126 $15,054 $15,054 $15,801
Accumulated other comprehensive income ($185) ($511) ($723) ($614) ($571) ($521) ($521) ($521) ($521) ($521) ($521) ($521) ($521) ($521)
Accumulated deficit $2,190 $1,949 $2,545 $3,058 $3,915 $4,167 $4,841 $4,841 $5,567 $6,765 $7,394 $8,416 $8,416 $13,705
Total stockholders' equity (deficit) $9,746 $10,741 $13,384 $14,756 $16,538 $17,782 $18,452 $18,452 $18,866 $19,578 $20,166 $21,117 $21,117 $27,153

Total Liabilities & Shareholders Equity $40,159 $54,505 $65,444 $61,128 $65,076 $70,897 $80,860 $80,860 $73,067 $75,312 $80,376 $92,835 $92,835 $109,380
Source: Company Reports; Aegis Capital Estimates

Amazon.com Cash Flow Statement (in $Millions, except per share data)
Period 2013 2014 2015 1Q16 2Q16 3Q16 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E
Net income (loss) $273 ($241) $596 $513 $857 $252 $674 $2,296 $726 $1,198 $629 $1,022 $3,575 $5,290
Adjustments to reconcile net income (loss) to net cash provided$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Depreciation of fixed assets, including internal-use software$3,253
and website development,
$4,745 and other
$6,281
amortization$1,827 $1,909 $2,084 $2,147 $7,967 $2,211 $2,277 $2,346 $2,416 $9,250 $10,411
Stock-based compensation $1,134 $1,497 $2,120 $544 $768 $776 $759 $2,847 $636 $463 $907 $877 $2,883 $3,286
Other operating expense (income) $114 $130 $155 $43 $53 $31 $32 $159 $32 $32 $32 $32 $128 $128
Losses (gains) on sales of marketable securities, net $1 ($4) $5 $2 $1 $0 $0 $3 $0 $0 $0 $0 $0 $0
Remeasurements and other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Non-cash interest expense and other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Expense (income) $166 $62 $244 ($52) $31 ($23) $0 ($44) $0 $0 $0 $0 $0 $0
Deferred income taxes ($157) ($319) $82 $11 $106 ($81) $0 $36 $0 $0 $0 $0 $0 $0
Excess tax benefits on stock awards ($78) ($6) ($119) ($207) ($113) ($173) $0 ($493) $0 $0 $0 $0 $0 $0
Cumulative effect of change in accounting principle $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Changes in operating assets and liabilities:

Inventories ($1,411) ($1,193) ($2,186) $769 ($57) ($1,095) ($1,948) ($2,331) $480 $51 ($1,311) ($2,668) ($3,448) ($4,058)
Accounts receivable, net and other current assets ($846) ($1,038) ($1,755) $412 ($1,184) ($671) ($1,481) ($2,924) $982 ($1,253) ($585) ($2,193) ($3,049) ($3,816)
Accounts payable $1,888 $1,758 $4,294 ($5,770) $977 $2,540 $6,376 $4,123 ($7,456) $1,265 $3,043 $7,600 $4,452 $4,737
Accrued expenses and other current liabilities $737 $709 $910 ($956) ($15) $441 $3,210 $2,680 ($1,496) $186 $1,039 $4,242 $3,971 $4,762
Additions to unearned revenue $2,691 $4,433 $7,401 $2,814 $2,340 $2,802 ($294) $7,662 $746 $81 $394 ($333) $887 $1,010
Amortization of previously unearned revenue ($2,291) ($3,692) ($6,108) ($2,110) ($2,208) ($2,397) $0 ($6,715) $0 $0 $0 $0 $0 $0
Interest payable $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net cash provided by (used in) operating activities $5,474 $6,841 $11,920 ($2,160) $3,465 $4,486 $9,476 $15,267 ($3,140) $4,301 $6,494 $10,994 $18,649 $21,749

Investing Activities
Purchases of fixed assets, including internal-use software and
($3,443)
website development
($4,892) ($4,588) ($1,179) ($1,711) ($1,841) ($1,791) ($6,522) ($1,619) ($1,682) ($1,797) ($2,473) ($7,571) ($9,165)
Acquisitions, net of cash acquired ($311) ($980) ($795) ($16) ($14) ($84) $0 ($114) $0 $0 $0 $0 $0 $0
Sales and maturities of marketable securities and other investments
$2,304 $3,349 $3,025 $1,138 $931 $1,431 $0 $3,500 $0 $0 $0 $0 $0 $0
Purchases of marketable securities ($2,826) ($2,543) ($4,092) ($636) ($1,645) ($2,076) $0 ($4,357) $0 $0 $0 $0 $0 $0
Proceeds from sale of subsidiary $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Investments in equity-method investees and other investments $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net cash provided by (used in) investing activities ($4,276) ($5,066) ($6,450) ($693) ($2,439) ($2,570) ($1,791) ($7,493) ($1,619) ($1,682) ($1,797) ($2,473) ($7,571) ($9,165)

Financing Activities
Proceeds from exercises of stock options and other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Excess tax benefit on stock awards $78 $6 $119 $207 $113 $173 $0 $493 $0 $0 $0 $0 $0 $0
Proceeds from issuance of common stock, net of issuance costs$0 $0 $93 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Common Stock repurchased $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Proceeds from long-term debt and other $380 $6,360 ($680) $9 $66 $8 $0 $83 $0 $0 $0 $0 $0 $0
Repayments of long-term debt, capital lease obligations ($997) ($1,865) ($712) ($175) ($70) ($26) $0 ($271) $0 $0 $0 $0 $0 $0
Net cash provided by (used in) financing activities ($539) $4,433 ($3,763) ($789) ($1,039) ($827) ($795) ($3,450) ($980) ($980) ($980) ($980) ($3,921) ($2,667)
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Foreign-currency effect on cash and cash equivalents ($85) ($309) ($374) $222 $64 $46 $0 $332 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net increase (decrease) in cash and cash equivalents $574 $5,899 $1,333 ($3,420) $51 $1,135 $6,890 $4,656 ($5,739) $1,639 $3,717 $7,541 $7,157 $9,917
Cash and the beginning of period $8,084 $8,658 $14,557 $15,890 $12,470 $12,521 $13,656 $15,890 $20,546 $14,806 $16,445 $20,162 $20,546 $27,703
Cash and cash equivalents at end of period $8,658 $14,557 $15,890 $12,470 $12,521 $13,656 $20,546 $20,546 $14,806 $16,445 $20,162 $27,703 $27,703 $37,620
Source: Company Reports; Aegis Capital Estimates

17 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Amazon.com Statistics (in $Millions, except per share data)

Period 2013 2014 2015 1Q16 2Q16 3Q16 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E
Revenue Mix
Total North America 59.8% 57.1% --- --- --- --- --- --- --- --- --- --- --- ---
Total International 40.2% 37.7% 33.1% 32.8% 32.4% 32.4% 32.4% 32.5% 32.1% 31.3% 31.5% 32.1% 31.8% 31.0%

Total Media 29.2% 25.3% 21.0% 19.5% 17.1% 17.5% 17.0% 17.7% 16.6% 14.5% 15.0% 14.7% 15.1% 13.2%
Total Electronics 65.5% 68.4% 70.6% 70.5% 72.2% 71.5% 73.8% 72.2% 71.5% 73.1% 72.3% 74.8% 73.1% 73.4%
Total Other 5.3% 1.1% 1.0% 1.1% 1.1% 1.1% 1.0% 1.1% 1.1% 1.1% 1.1% 1.0% 1.1% 1.1%

North America Media 14.5% 13.0% 11.7% 11.0% 9.6% 9.9% 9.5% 9.9% 9.6% 8.5% 8.7% 8.3% 8.7% 7.7%
North America Electronics 40.3% 43.3% 47.1% 46.4% 47.6% 46.9% 49.1% 47.7% 46.6% 48.0% 47.2% 49.2% 47.9% 48.0%
North America Other 5.0% 0.8% 0.8% 1.0% 0.9% 0.9% 0.8% 0.9% 1.0% 1.0% 1.0% 0.8% 0.9% 0.9%
International Media 14.6% 12.3% 9.4% 8.5% 7.5% 7.6% 7.5% 7.7% 7.0% 6.0% 6.3% 6.4% 6.4% 5.4%
International Electronics 25.3% 25.1% 23.5% 24.1% 24.7% 24.6% 24.7% 24.6% 25.0% 25.1% 25.1% 25.5% 25.2% 25.4%
International Other 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

Margins
Gross Margins 27.2% 29.5% 33.0% 35.2% 36.9% 35.0% 32.9% 34.8% 36.2% 37.9% 36.0% 33.9% 35.8% 36.8%
EBITDA Margins 7.0% 7.4% 10.1% 12.0% 12.0% 10.6% 9.0% 10.7% 11.6% 12.7% 11.1% 9.1% 10.9% 11.8%
Operating Margins 1.0% 0.2% 2.1% 3.7% 4.2% 1.8% 2.4% 2.9% 3.6% 5.2% 2.9% 3.1% 3.6% 5.0%
Marketing Expenses as a % of sales, ex-Stock based comp 4.1% 4.7% 4.7% 4.7% 5.0% 5.1% 5.0% 5.0% 5.1% 5.1% 5.1% 5.2% 5.1% 5.0%
Fulfillment exp. as % of Sales , ex-stock based comp 11.1% 11.7% 12.1% 12.3% 12.5% 12.7% 13.0% 12.7% 12.5% 12.5% 12.7% 13.0% 12.7% 12.6%
Technology & Content exp. as % of Sales, ex-stock based8.0%
comp 9.5% 10.6% 11.0% 12.0% 11.3% 9.8% 10.9% 11.7% 12.0% 11.3% 10.0% 11.1% 11.0%
General and administrative exp. as % of Sales, ex-stock based
1.3% comp 1.5% 1.4% 1.5% 1.7% 1.7% 1.0% 1.4% 1.5% 1.7% 1.7% 1.0% 1.4% 1.4%
Total Opex as % of Sales, ex-stock based comp 97.5% 98.1% 95.9% 94.5% 94.4% 95.9% 95.9% 95.3% 94.7% 93.5% 94.9% 95.3% 94.7% 93.4%

Expense Growth Rates

Gross Profit Growth, q/q % (10.0)% 9.4% 2.0% 28.7% --- (11.5)% 8.7% 1.5% 29.6% --- ---
Gross Profit Growth, y/y % 34.0% 29.4% 34.8% 40.2% 39.9% 33.1% 29.2% 34.8% 27.0% 26.2% 25.6% 26.4% 26.3% 24.4%

Marketing & Sales (ex-SBC), q/q% --- (18.7)% (70.2)% 19.8% 48.2% --- (18.0)% (71.9)% 11.0% 50.0% --- ---
Marketing & Sales (ex-SBC), y/y% 29.8% 38.1% 20.3% 31.7% 37.4% 35.9% 31.9% 34.0% 33.0% 26.1% 23.2% 27.6% 27.3% 18.7%

Technology and Content (ex-SBC), q/q% 0.1% 13.6% 1.5% 18.6% --- (4.1)% 6.5% 0.6% 21.8% --- ---
Technology and Content (ex-SBC), y/y% 44.3% 42.1% 33.6% 27.3% 35.0% 28.2% 36.8% 32.1% 31.2% 23.0% 21.9% 25.2% 25.1% 20.0%

General and administrative (ex-SBC), q/q% 29.2% 20.1% 4.3% (22.8)% --- 27.7% 19.5% 3.6% (22.4)% --- ---
General and administrative (ex-SBC), y/y% 26.8% 38.9% 12.0% 16.9% 31.1% 39.2% 25.0% 28.3% 23.5% 22.9% 22.1% 22.7% 22.8% 21.0%

Book Value per Share $21.15 $23.05 $28.18 $30.68 $34.24 $36.66 $38.04 $38.16 $38.74 $40.04 $41.07 $42.83 $43.10 $54.52
Cash & Equivalents per Share $27.01 $37.37 $41.70 $32.97 $34.24 $37.83 $52.03 $52.20 $40.04 $43.22 $50.62 $65.71 $66.11 $84.96
Source: Company Reports; Aegis Capital Estimates

Amazon.com Revenue Detail (in $Millions, except per share data)

Period 2013 2014 2015 1Q16 2Q16 3Q16 4Q16E 2016E 1Q17E 2Q17E 3Q17E 4Q17E 2017E 2018E
Total Revenues $74,453 $88,988 $107,007 $29,128 $30,404 $32,714 $44,783 $137,029 $35,981 $37,368 $39,934 $54,956 $168,239 $203,671
y/y % change 21.9% 19.5% 20.2% 28.2% 31.1% 29.0% 25.3% 28.1% 23.5% 22.9% 22.1% 22.7% 22.8% 21.1%

Product Sales $60,903 $70,080 $79,269 $20,581 $21,116 $22,339 $31,348 $95,384 $25,063 $25,579 $26,870 $37,920 $115,431 $137,712
q/q % change -22.7% 2.6% 5.8% 40.3% $0 -20.0% 2.1% 5.0% 41.1% $0 $0
y/y % change 17.7% 15.1% 13.1% 20.5% 23.5% 21.0% 17.8% 20.3% 21.8% 21.1% 20.3% 21.0% 21.0% 19.3%
% of Total 81.8% 78.8% 74.1% 70.7% 69.5% 68.3% 70.0% 69.6% 69.7% 68.5% 67.3% 69.0% 68.6% 67.6%

Service Sales $13,550 $18,908 $27,738 $8,547 $9,288 $10,375 $13,435 $41,645 $10,918 $11,789 $13,064 $17,036 $52,807 $65,959
q/q % change -6.4% 8.7% 11.7% 29.5% $0 -18.7% 8.0% 10.8% 30.4% $0 $0
y/y % change 44.8% 39.5% 46.7% 51.7% 52.7% 50.5% 47.2% 50.1% 27.7% 26.9% 25.9% 26.8% 26.8% 24.9%
% of Total 18.2% 21.2% 25.9% 29.3% 30.5% 31.7% 30.0% 30.4% 30.3% 31.5% 32.7% 31.0% 31.4% 32.4%

3P Sales $9,615 $17,949 $26,717 $8,218 $8,944 $10,003 $12,999 $40,164 $10,509 $11,365 $12,609 $16,504 $50,987 $63,792
q/q % change -6.9% 8.8% 11.8% 29.9% $0 -19.2% 8.1% 10.9% 30.9% $0 $0
y/y % change 40.6% 86.7% 48.8% 52.2% 53.0% 50.5% 47.3% 50.3% 27.9% 27.1% 26.0% 27.0% 26.9% 25.1%
% of Total 12.9% 20.2% 25.0% 28.2% 29.4% 30.6% 29.0% 29.3% 29.2% 30.4% 31.6% 30.0% 30.3% 31.3%
3P Gross Sales $56,559 $105,582 $157,159 $48,341 $52,612 $58,841 $76,464 $236,258 $61,819 $66,851 $74,169 $97,085 $299,924 $375,249
q/q % change -6.9% 8.8% 11.8% 29.9% $0 -19.2% 8.1% 10.9% 30.9% $0 $0
y/y % change 40.6% 86.7% 48.8% 52.2% 53.0% 50.5% 47.3% 50.3% 27.9% 27.1% 26.0% 27.0% 26.9% 25.1%
Commission % 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% 17.0%
Total Gross Product Sales $117,462 $175,662 $236,428 $68,922 $73,728 $81,180 $107,812 $331,642 $86,882 $92,429 $101,039 $135,005 $415,355 $512,961
q/q % change -12.2% 7.0% 10.1% 32.8% $0 -19.4% 6.4% 9.3% 33.6% $0 $0
y/y % change 27.7% 49.5% 34.6% 41.1% 43.2% 41.0% 37.3% 40.3% 26.1% 25.4% 24.5% 25.2% 25.2% 23.5%
1P % of Gross Product Sales 51.8% 39.9% 33.5% 29.9% 28.6% 27.5% 29.1% 28.8% 28.8% 27.7% 26.6% 28.1% 27.8% 26.8%
3P % of Gross Product Sales 48.2% 60.1% 66.5% 70.1% 71.4% 72.5% 70.9% 71.2% 71.2% 72.3% 73.4% 71.9% 72.2% 73.2%

AWS, Advertising, CC Fees $3,935 $959 $1,021 $329 $344 $372 $436 $1,481 $408 $424 $455 $532 $1,820 $2,167
q/q % change 8.6% 4.6% 8.1% 17.2% $0 -6.3% 3.9% 7.3% 16.8% $0 $0
y/y % change 56.0% -75.6% 6.5% 40.6% 46.4% 49.4% 43.9% 45.0% 24.2% 23.3% 22.4% 22.0% 22.9% 19.0%
AWS $3,108 $4,644 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Advertising & Other $827 ($3,685) $1,021 $329 $344 $372 $436 $1,481 $408 $424 $455 $532 $1,820 $2,167
Source: Company Reports; Aegis Capital Estimates

18 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Required Disclosures
Price Target
We have a $953 price target on Amazon

Valuation Methodology
Our price target is based on a sum-of-the-parts analysis.

Risk Factors
Rising competition for retail and AWS.
Key man risk Amazons future growth and strategic direction could be negatively impacted if Jeff Bezos were not able to perform
his duties as CEO.
Macro weakness could weigh on growth. The impact of the Brexit vote is one that we are monitoring closely.
India could impose restrictions on foreign firms that, like China, could diminish Amazons competitive position.

For important disclosures go to www.aegiscap.com.

I, Victor Anthony, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject
companies and their securities. I also certify that I have not been, do not, and will not be receiving direct or indirect compensation in
exchange for expressing the specific recommendations in this report.

Research analyst compensation is not dependent upon investment banking revenues received by Aegis Capital Corp.

Aegis Capital Corp. intends to seek or expects to receive compensation for investment banking services from the subject company within
the next three months.

The firm nor the Research Analyst have any material conflict of interest in which the Research Analyst has a reason to know or knows
at the time of publication of this research report.

Neither the research analyst who prepared this report or a member of the research analysts household has a financial position in the debt
or equity securities of the subject company.

As of the report date neither Aegis Capital Corp. or its affiliates beneficially own 1% or more of any class of common equity securities
of the subject company of this report.

19 AEGIS CAPITAL CORP.

Amazon.com, Inc. January 20, 2017

Investment Banking
Services/Past 12 Mos.
Rating Percent Percent
BUY [BUY] 85.98 30.43
HOLD [HOLD] 13.08 21.43
SELL [SELL] 0.93 0.00

Meaning of Ratings
A) A Buy rating is assigned when we do not believe the stock price adequately reflects a company's prospects over 12-18 months.
B) A Hold rating is assigned when we believe the stock price adequately reflects a company's prospects over 12-18 months.
C) A Sell rating is assigned when we believe the stock price more than adequately reflects a company's prospects over 12-18 months.

Other Disclosures
Other Disclosures The information contained herein is based upon sources believed to be reliable but is not guaranteed by us and is not
considered to be all inclusive. It is not to be construed as an offer or the solicitation of an offer to sell or buy the securities mentioned herein.
Aegis Capital Corp., its affiliates, shareholders, officers, staff, and/or members of their families, may have a position in the securities
mentioned herein, and, before or after your receipt of this report, may make or recommend purchases and/or sales for their own accounts
or for the accounts of other customers of the Firm from time to time in the open market or otherwise. Opinions expressed are our present
opinions only and are subject to change without notice. Aegis Capital Corp. is under no obligation to provide updates to the opinions or
information provided herein. Additional information is available upon request.
The common stock of the subject company in this report may not be suitable for certain investors based on their investment objectives,
degree of risk, as well as their financial status.

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20 AEGIS CAPITAL CORP.