News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bullish
Wall Street
Mixed
Gold
Bearish
GBP/USD
Bullish
USD/JPY
Bullish
More View more
Real Time News
  • What are the three ways the stock market impacts the economy? Find out here. https://t.co/fg2dYSBPgB https://t.co/zsILutmUNx
  • Heads Up:💶 ECB Monetary Policy Meeting Accounts due at 12:30 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-11-26
  • 🇲🇽 Economic Activity YoY (SEP) Actual: -5.5% Expected: -6.6% Previous: -9.2% https://www.dailyfx.com/economic-calendar#2020-11-26
  • 🇲🇽 GDP Growth Rate YoY Final (Q3) Actual: -8.6% Expected: -8.6% Previous: -18.7% https://www.dailyfx.com/economic-calendar#2020-11-26
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 93.81%, while traders in NZD/USD are at opposite extremes with 75.00%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/feJqffHqgL
  • Heads Up:🇲🇽 Economic Activity YoY (SEP) due at 12:00 GMT (15min) Expected: -6.6% Previous: -9.4% https://www.dailyfx.com/economic-calendar#2020-11-26
  • Heads Up:🇲🇽 GDP Growth Rate YoY Final (Q3) due at 12:00 GMT (15min) Expected: -8.6% Previous: -18.7% https://www.dailyfx.com/economic-calendar#2020-11-26
  • Commodities Update: As of 11:00, these are your best and worst performers based on the London trading schedule: Gold: 0.33% Silver: 0.24% Oil - US Crude: -0.95% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/jPS6eutSJM
  • Forex Update: As of 11:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.19% 🇨🇦CAD: 0.01% 🇨🇭CHF: 0.01% 🇳🇿NZD: -0.01% 🇪🇺EUR: -0.06% 🇬🇧GBP: -0.23% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/HqATYLbE8t
  • Indices Update: As of 11:00, these are your best and worst performers based on the London trading schedule: US 500: 0.03% Wall Street: 0.02% Germany 30: -0.15% France 40: -0.21% FTSE 100: -0.46% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/JYnnEKiOrs
Interested In Amazon Stock? Don't Ignore These Overlooked Risks

Interested In Amazon Stock? Don't Ignore These Overlooked Risks

2013-05-03 02:08:00
Jason Shemtob,
Share:

As investors continue to debate the future profitability of Amazon (AMZN) following its most recent earnings report, they should be sure to keep in mind the company’s large holdings of unrepatriated income. These assets could prove to be a key factor in Amazon’s future growth, but remain in limbo due to the combination of currency risk and the United States’ high corporate tax rate.

Recent news concerning Apple’s rare use of debt financing has led to public discussion concerning unrepatriated income, or foreign corporate earnings that have yet to be reinvested back into the United States. These earnings are quite common among large companies with significant international operations. Oftentimes, these US-based firms do not wish to bring earnings back into the United States due to the high corporate tax rate of 35%. In addition to the high tax cost associated with this move is significant currency risk, a topic we have thoroughly discussed in previous articles. The most recent company to engage this discussion is the online retail giant Amazon (AMZN), which has seen substantial overseas growth in recent years.

Interested_In_Amazon_Stock_Dont_Ignore_Earnings_Repatriation_and_Currency_Translation_Risks_body_Picture_4.png, Interested In Amazon Stock? Don't Ignore These Overlooked Risks

This growth abroad has resulted in a plethora of cash/cash equivalents and short term investments, currently denominated in currencies other than the USD. Over the last 5 years Amazon’s foreign cash pile has even surpassed its domestic counterpart, growing by approximately 325%.

Interested_In_Amazon_Stock_Dont_Ignore_Earnings_Repatriation_and_Currency_Translation_Risks_body_Picture_3.png, Interested In Amazon Stock? Don't Ignore These Overlooked Risks

STI STI = Short Term Investments

While these large international holdings provide Amazon with additional fuel for its aggressive growth strategy ($3.7 billion in Capex in 2012 alone), the true future value generated from these holdings differ from their reported amount. If at some point Amazon should need to repatriate this foreign cash pile, they will not only be faced with the aforementioned tax charge; but a possible, hefty influence will also be exacted via exchange rates. These currency fluctuations could be especially damaging if Amazon does not have the luxury of waiting until rates are more favorable before investing into the U.S.

Currently most of Amazon’s foreign cash is denominated in Euros, Pounds, and Yen, although the company does not provide a breakdown of the amount held of each. Regardless, when looking at the movements over the past year of these currencies versus the Dollar, we can see the effect currency translations and US taxes can have on repatriated income.

New to FX? Register for this free 20 minute course HERE and learn common FX terms like leverage and how to implement conservative amounts.

Interested_In_Amazon_Stock_Dont_Ignore_Earnings_Repatriation_and_Currency_Translation_Risks_body_Picture_2.png, Interested In Amazon Stock? Don't Ignore These Overlooked RisksInterested_In_Amazon_Stock_Dont_Ignore_Earnings_Repatriation_and_Currency_Translation_Risks_body_Picture_1.png, Interested In Amazon Stock? Don't Ignore These Overlooked Risks

Favorable (Unfavorable) Exchange rates based on highs (lows) during 1 year period

Foreign cash holdings based on 2012 10K and distributed evenly among the Euro, Pound, and Yen

The above example, while based on a hypothetical distribution of foreign earnings and past exchange rates, should provide an idea of the cash burn that international companies can potentially face due to repatriation tax and fluctuating exchange rates.

While the for the time being Amazon appears capable of producing enough cash to fund its prolific expansionary efforts, the future is uncertain and a slowdown in annual cash flows may require the company to reach into its foreign cash holdings. Investors who hold amazon stock, should therefore follow the company’s cash production and expenditures closely, as well as EURUSD, GBPUSD, and USDJPY rate movements.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES