Business Watch

Amazon Gets Credit-Rating Outlook Boost by Fitch

Amazon.com (AMZN) had its credit rating outlook raised to positive from stable by Fitch Ratings on Thursday as the e-commerce giant’s dominance comes with a strengthening operating and financial profile that’s brought better-than-expected results.

Fitch expects revenue growth of about 16% this year and 10% to 15% from 2020, with consolidated revenue reaching almost $350 billion by 2021, although the average annual growth over the last five years was greater than 25%, the ratings agency said in a note. Margins on earnings before interest, tax, depreciation and amortization are seen improving to about 17% from 14%.

“Margin improvement is expected to be generated primarily through business mix changes stemming from above company-average topline growth by the higher-margin Amazon Web Services (AWS) business,” Fitch said, referring to the cloud-computing branch.

Amazon’s long-term issuer default rating was maintained at A+, while the short-term level was raised to F1+ from F1.

“The rating considers the company’s impressive track record of strategic vision and execution and its flexible operating platform, which provides growth opportunities across numerous verticals,” according to Fitch.

Amazon built loyalties by selling books online before adding product categories and building infrastructure for distributions to ensure good customer service, Fitch said. The retailer is seen as growing its existing businesses and expanding in areas faster than the average new entrant. Future avenues for growth could include logistics, health care and financial services.

Amazon.com (AMZN) had its credit rating outlook raised to positive from stable by Fitch Ratings on Thursday as the e-commerce giant’s dominance comes with a strengthening operating and financial profile that’s brought better-than-expected results.

Fitch expects revenue growth of about 16% this year and 10% to 15% from 2020, with consolidated revenue reaching almost $350 billion by 2021, although the average annual growth over the last five years was greater than 25%, the ratings agency said in a note. Margins on earnings before interest, tax, depreciation and amortization are seen improving to about 17% from 14%.

“Margin improvement is expected to be generated primarily through business mix changes stemming from above company-average topline growth by the higher-margin Amazon Web Services (AWS) business,” Fitch said, referring to the cloud-computing branch.

Amazon’s long-term issuer default rating was maintained at A+, while the short-term level was raised to F1+ from F1.

“The rating considers the company’s impressive track record of strategic vision and execution and its flexible operating platform, which provides growth opportunities across numerous verticals,” according to Fitch.

Amazon built loyalties by selling books online before adding product categories and building infrastructure for distributions to ensure good customer service, Fitch said. The retailer is seen as growing its existing businesses and expanding in areas faster than the average new entrant. Future avenues for growth could include logistics, health care and financial services.

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