Amazon is a company that we all know, we all love, and that we all now rely upon. Growing from a simple bookseller in the 90s to a glorified tech company that provides pretty much anything that we could possibly need, this firm has shown us what fast-paced, dizzying growth truly is.
Growth like this, unfortunately, does come at the cost of its competitive integrity. With both the E.U. and the U.S. courts determined to rein in Amazon’s reach, as well as pervading feelings of: ‘well, how can it go any higher?’, many investors must be asking themselves if it is worth holding onto this stock. If Amazon becomes subject to more antitrust violations and its monopolizing tactics are increasingly prevented, then Amazon itself might struggle to continue along its high growth trajectory.
Whilst these are very serious considerations, we believe they will eventually become mere blips on its radar. Here are three reasons why Amazon will instead continue to grow, and why you should never sell your Amazon stock.
It is still young & fresh
Despite Amazon’s size, it is still a young business having been founded in 1994. Yet, it has become the world’s largest e-commerce company with revenue that hit $280.5 billion in 2019, but this is only scraping the $25 trillion global retail market. Amazon currently possesses over 52% of the U.S. e-commerce market share, whilst globally it holds around 14%. These numbers will only continue to grow, even if we rid ourselves of COVID-19 — online shopping has become a normal way of life.
Amazon has another huge area of business that continues to grow and develop: Amazon Web Service. Cloud platforms are expanding massively thanks to the coronavirus, and looking forward it is a good way for companies to store large amounts of data externally from their own systems. Amazon has been at the forefront of cloud infrastructure since its launch in 2006 and currently possesses a 33% overall market share.
There are many reports that come out about Amazon, citing it as either a brilliant or a toxic working environment, but one thing is for sure, the company exudes a strong corporate culture. Amazon is well known for having a different outlook on business; CEO/Founder Jeff Bezos himself refers to the working attitude as ‘day one thinking’ whereby every day should be taken as if it is the first day of business. This encourages hard work and innovation, something that is essential in the fast-paced, ever-changing tech sector.
The Echo Dot-maker has an invested leader who is almost obsessive about continually expanding the business. Whilst many investors tend to look for dividend-paying stocks, Amazon prefers to funnel its cash into growth, which ultimately pays off for investors as its stock has generated an average return of 39% each year for the last 10 years. With Jeff Bezos owning 11% of all shares available, you can be sure that the CEO is committed to continued growth.
Cash and carry on
As of October 23, 2020, the company’s market cap stood at $1.6 trillion. And whilst Amazon seems to be the picture of success, this success has been built through learning from its mistakes thus continuously improving its business model. For example, the outrageously bad ‘Fire Phone’ was a rather large flop in 2014, but off the back of its speech recognition software — originally developed for the phone— came Alexa and the Echo Dot. Amazon has the cash, the size, and the strength to put together a product team, spending hundreds of millions of dollars, only for the product to fail.
By diversifying its business from e-commerce into healthcare, video games, film production, clothing, etc. it has built a hugely dominant empire with very little risk as it continues to grow. It can be easily imagined that these recent antitrust battles will not affect Amazon’s business, but rather, be taken on-board as an opportunity to learn thus continuing its journey to become the most valuable business in the world.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in the companies mentioned above. Read our full disclosure policy here.
Contributing Writer at MyWallSt
Poppy’s favorite stock is Nvidia as she loves innovation and this stock has bags of it. Nvidia invented the GPU in 1999 and even today its immersive graphics give life to the gaming world. Poppy is also inspired by Nvidia’s ability to imagine and create positive change for the world, with its AI technology fuelling new developments in the automotive industry, the medical industry, as well as powering data centers around the world.