Is there any doubt in your mind that Amazon isn’t worth investing in today?
Even with its stock price trading at nearly $575 per share, AMZN is still an unquestionable buy.
Here are four great ones…
Consider that its IPO price was set at $18 per share, raising $54 million dollars and giving it a market value of $438 million. It also put founder and CEO Jeff Bezos into the millionaire’s club.
Of course, that was 3 stock splits (two 2-1 and one 3-1) ago…
Had you invested $5K at the IPO price, your 312.5 shares would now be 3,750 shares worth $1,271,400.
And the value of Amazon itself? Well, that $438 million is now at a market cap of $267 billion.
Yes, that’s right, with a “B”.
The big question for those left behind has always been “How do they do it?”
The bigger question for today is “Will they continue to do it?”
Let’s take a look…
Why? It seems like its stock value has never had anything to go on except revenue growth, idea generation and hoped-for profit potential.
On the first two counts, Amazon has simply hit it out of the ballpark.
On the revenue side, Amazon’s revenue growth since 1997 has been over 800%.
Over the last 10 years alone, it has grown revenue from $8.5 billion at FY (December) 2005 to $95.8 billion for FY 2014.
Here’s how they do it…
To call it an e-commerce company is just the smallest tip of the iceberg.
Take a look at this list of innovations and you get an idea of just what this company has meant to the world of retailing.
From Amazon’s Prime service, which was launched in 2005 to provide an exclusive delivery service to members, to its Prime Now, which offers delivery for millions of items within 1 hour, to its eventual move to Prime Air, which is expected to provide delivery within 30 minutes, Amazon has revolutionized the delivery service model.
Amazon has also changed the way the world buys and reads books with Kindle, internet streaming with Amazon Fire, and changed the fulfillment industry with its robotics, warehousing systems and package tracking and delivery.
Still riding the fence about investing in Amazon?
These four reasons should change that…
1. Amazon Web Services is King of the Cloud
AWS is relatively new to the Amazon strategy, having launched in 2006.
In fact, up until early this year, AWS was simply listed by Amazon as “Other Revenue” on its income statements.
But investing in a web service always made sense, given the extraordinary amount of data Amazon was collecting through its massive retail network.
Today, AWS is a complete, cloud-based infrastructure platform that offers services from computing, data storage and management to data analytics and applications.
AWS is working out extremely well for Amazon. It’s currently the biggest public cloud in the world, and generated $1.82 billion in revenue in Amazon’s fiscal second quarter ended June 30.
That’s an 81% year-over-year growth rate, and as shown on the chart below, the continuation of a trend:
What’s better for investors is the expected growth…
Motley Fool reported from the Amazon Re:Invent conference that AWS is on pace for a $7.3 billion run rate, and now boasts over 1 million business customers.
As for profits, Amazon reported a 19.3% operating income margin for the business through June 30.
Amazon Web Services is just the first reason to turn around naysayers.
Keep in mind the first products at Amazon were all about retail…
2. Make Way, Walmart
After posting strong second quarter (June, 2015) earnings, Amazon’s stock price moved up to just under $530 per share.
With that move, Amazon passed Walmart (WMT) to become the biggest retailer by market capitalization in the world.
Now, that’s not to say Amazon is the biggest by revenues. In fact, Walmart’s annual revenue of nearly $500 billion dwarfs Amazon to the point where, realistically, Amazon will never catch up.
The latest might just be Amazon’s move to make its one-hour delivery an everyday, easy-peasy service others will have to try and match.
Amazon just rolled out the service in Minnesota’s Twin Cities of Minneapolis and St. Paul, joining this list of cities where the service is being offered:
And get a load of what Amazon has up its sleeve…
Yes, it might be a bit pricey, as you have to be an Amazon Prime member and shell out $299 per year to use the service.
However, make no mistake: Amazon will retool and refine until they get it right, and lots—like, tens of thousands—of customers will eventually sign on for the convenience.
Amazon’s continued ability to innovate the retail industry is yet another reason to make the move to Amazon stock.
Of course, investors have always wondered when Amazon will actually make money to justify such a soaring stock price.
There’s good news on that front, too…
It’s always been an up and down game on the bottom line for Amazon.
From an $1,152 billion net earnings in fiscal 2010 to a loss of $241 million in fiscal 2014, Amazon has been all over the board.
Perhaps it’s time to start making money on a consistent basis.
AWS is starting to contribute on the bottom line. A good start, with expectations that it will generate $1 billion per year.
The company is making a major push into marketing in India, a hoped-for growth engine to complement its non-U.S. revenue streams.
And with its foot in what seems like every retailing door, analysts are finally coming around to forecasting a decent 2015 and breakout 2016.
Yahoo! Finance shows analysts average EPS in 2015 at $1.61 per share, with 2016 ballooning to $4.86, with a high of $8.59 per share.
Of course, anything can happen. The economy continues to chug along slowly, and much of Amazon’s business is still a virtual commodity with some thin margins that can easily sap EPS dreams.
But here’s where the fourth reason to turn around on Amazon comes into play…
The late ESPN superstar Stuart Scott coined the phrase “Don’t hate the player, hate the game,” when a superstar athlete performed a feat of the impossible, much to the chagrin of opposing players and fans.
Say the same for Amazon’s CEO Jeff Bezos.
He’s been vilified for taking over the Washington Post and changing its culture and organization during the course of his eight-month reign…
His business methods have been questioned by those who object to his supposed sweatshop-like conditions in Amazon warehouses…
Investors and analysts have railed against a company with a huge market value and stratospheric earnings multiples…
But Bezos is one of the true tech-genius founders in the sector—one of those who has changed the rules of the game, all the while seeming two steps ahead of everyone else.
Bezos has forged his personality into the retail sector, and singlehandedly continues to drive the incredible creativity of Amazon.
He is also the owner of 84 million shares of Amazon stock, good for 18% of its total outstanding shares.
Bezos’s relentless energy, drive and vision of the future are similar to that of Apple’s (AAPL) Steve Jobs and others who’ve made changes to the way we do things (in this case, buy goods and merchandise).
Investors looking at Amazon shouldn’t blink for a minute over concerns Bezos might lose his focus on that future.
It’s not going to happen.
No, investors who wonder whether Amazon, for all its faults and flaws, is a company and stock for the long term, should wonder no longer.
Three words: buy Amazon stock.
This post originally appeared in mainstreetinvestor.com.
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