It’s good to be the King. Right now, Amazon.com (NASDAQ:AMZN) is the King of tech, and AMZN stock is the King of tech stocks.
While Apple (NASDAQ:AAPL) is getting deserved praise for exceeding $1 trillion in market cap, AMZN stock is at $935 billion, more than doubling Apple’s gains so far in 2018.
Amazon’s revenues continue to grow 40% year-over-year, despite hitting almost $178 billion last year. The tech giant’s net income has already exceeded 2017’s $3 billion, and analysts are far more optimistic about the future of AMZN stock than that of Apple.
Amazon’s success has given it a political halo outside its hometown of Seattle. There are 20 cities still competing fiercely for its HQ2 project, which is impacting the local politics of many municipalities.
Take Atlanta for Instance
Atlanta Mayor Keisha Bottoms is using HQ2 to distract from a burgeoning scandal. HQ2 is being touted as a possible lead tenant in a planned downtown project over an old railroad yard called “The Gulch.”
“The Gulch” won’t win HQ2. Amazon said last year it wanted 100 acres of raw land, which Atlanta could put together at locations the city has not touted. The Mayor is playing politics, not making a business case.
But it almost doesn’t matter because Amazon’s needs are so great. The company now has 17 tech hubs employing over 17,000 people, each focused on a different niche. The Boston hub works on Alexa, New York on fashion, Los Angeles on gaming. An Atlanta hub focused on technology for financial companies would make sense. With Georgia’s 30% entertainment tax credit, which has already brought several studios to the area, Atlanta would also make a great operating headquarters for Amazon Studios.
Amazon also needs to expand the operating footprint of its low-margin retail operations. Atlanta’s airport and trucking hubs south of the city offer huge advantages to distributors. Houses just south of downtown are also available for under $100,000, and many areas west of downtown are not much more expensive. Those would all be good attributes for AMZN’s retail hub. Amazon, in short, can transform Atlanta without giving it HQ2.
Strength to Strength for AMZN Stock
The point is that Amazon, like the other Cloud Czars, is rapidly becoming a national presence, with a national job footprint that it can leverage to shift public policy in many cities, not just Seattle and the HQ2 winner.
Analysts are currently expecting Amazon to have a $75 billion Christmas season, with total 2018 revenue of $234 billion, and total earnings of $17.31 per share. Its growth is expected to remain over 20% even into 2019, with revenue of $286 billion and net income of over $25 per share. That should make Amazon larger than Apple, but still less than 60% the size of Walmart (NASDAQ:WMT)
Hitting those targets will require Amazon to continue diversifying geographically. As I wrote a week ago, Amazon has ambitions in finance, in healthcare, and in advertising. Additionally, it is reportedly working on a new Fire OS phone that will be more closely integrated with its Prime Video program and its digital assistant, Alexa.
To make all of this work, Amazon will have to hire hundreds of thousands of new people. In 2016, Walmart was the country’s largest private employer with 2.3 million employees. Amazon was second at 600,000. The tech giant could yet pass Walmart in both employment and sales. But getting there will require more than just an HQ2.
The Bottom Line on AMZN Stock Is Power
The Amazon Effect can be used, and abused, by politicians of all types, but it’s based on the reality that the company continues to expand at an enormous rate.
So it barely matters where Amazon decides to put its HQ2. Many cities are going to win as Amazon grows, and the company is going to become an ever-larger political presence on the local, state, and national level. Those trends should also all be positive for AMZN stock
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned AMZN stock.
