Amazon.com, Inc. AMZN finally touched the coveted $1000 price milestone. Shares hit a new all-time high of $1001.2 on May 30, before closing a tad bit lower at $996.7.
Notably, it is the fifth company to have a quadruple digit price tag after Berkshire Hathaway's Class A shares, Seaboard, NVR Inc. and Priceline PCLN.
Amazon has had an impressive run on the bourse since its inception as a public limited company. The stock has gained a mammoth 66103.3% since it went public and 38% over the last one year.
Reportedly, Jeff Bezos' 17% stake in Amazon was worth about $80.3 billion when the company's shares touched $1,000 in early trading on Tuesday. Per Bloomberg's Billionaire Index, Bezos' total net worth is $85 billion, just behind Warren Buffett, whose total net worth is $88.8 billion.
Given the pace at which Amazon’s share are surging, Bezos is well poised to become the richest man in the world.
Amazon Riding High on Prime, AWS and IoT
Retail: Amazon’s retail business remains very hard to beat on price, choice and convenience. The company has a solid loyalty system in Prime and its Fulfillment By Amazon (FBA) strategy. Content addition continues to add selection to Prime memberships to get more people to Prime and generate increased sales for Amazon. Prime memberships help in repeat sales of not just general merchandise but also media (books, music, video, etc).
AWS: Amazon Web Services (AWS) is the cash cow for Amazon. It generates much higher margins than retail and is driving Amazon’s profitability. The company is the dominant name in the Infrastructure-as-a-Service (IaaS) market, with rival services like Microsoft’s MSFT Azure and Google Cloud Platform way behind. According to synergy research group, AWS had over 40% share of the public cloud market at the end of 2016 with Microsoft, IBM and Google GOOGL together accounting for 23%.
IoT: Alexa powered Echo devices are going great guns and help the company sell products and services. Artificial intelligence (AI) driven Alexa has already been integrated into a host of everyday devices for the digital home, which has converted the nascent smart home market into a potential area of growth in a very short time. The company is racing to build an ecosystem around Alexa and it’s safe to say that it has taken an early lead over Google's smart assistant and Microsoft's Cortana.
Amazon.com, Inc. Net Income (TTM)
There’s Still Room for Upside
Video: Amazon’s current focus is on building video content, primarily for Prime subscribers because the growth prospects in the market are considerable. According to marketsandmarkets, the global video streaming market is expected to witness compound annual growth rate (CAGR) of 18.3%. It is expected to grow from $30.29 billion in 2016 to $70.05 billion by 2021.
Brick and Mortar: Amazon’s accelerated brick-and-mortar efforts appear to be a counter strategy against slow growth and mounting competition in e-commerce.
Amazon now has seven bookstores across New York, Seattle, San Diego, Chicago, Portland, and Massachusetts in the U.S. The company is going the brick-and-mortar way with other merchandise as well. Its first brick-and-mortar grocery store branded Amazon Go is expected to open in Seattle and will offer a “check-out free” experience to customers.
Logistics: Amazon has been investing heavily in building air cargo hubs, leasing planes, purchasing trucks and designing drones. The company’s Chinese arm has filed with Chinese authorities as a handler of goods bound for ports in Japan, Europe and the U.S.
The accelerated push toward building its own in-house shipping and logistics service is positive. Amazon is not only developing an alternative to traditional shippers like FedEx and United Parcel Service for its own logistical needs but also has the potential to become a challenger to these established players in the long haul.
International Expansion: Amazon is expanding in a big way in India and has already pumped $5 billion into its Indian operations. It launched Prime Video in India and Prime membership in Mexico. Amazon took over Souq.com to strengthen its foothold in the Middle East. The deal should help it to establish a presence in countries like Egypt, Saudi Arabia, and the UAE.
What we think has particularly impressed investors about this deal is that Amazon is picking up the buy option over build. This means that Amazon will start generating revenues in the region right way without wasting any time in building its own infrastructure.
Additionally, from winning distribution rights to adding advantages to Prime subscribers in international markets, Amazon is leaving no stone unturned to boost its digital media sales across the globe. The efforts should expand Amazon’s video portfolio outside the U.S., thereby boosting its international presence. If Amazon could repeat its domestic success internationally, there is scope for further growth.
To Conclude
Calling Amazon the world’s largest online retailer would be too little to reflect its enormous power. The company capitalizes largely on its execution strength, robust performance and technological prowess. When you invest in Amazon, you invest in a very well diversified portfolio. This is because the company has its finger in almost every pie.
So don’t mind paying $1000 for a stock that shows a clear path to profitability.
Amazon shares currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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