Over the last twenty years, Amazon (NASDAQ: AMZN) stock has grown roughly 2,900%, which equals an average compound annual growth rate of 18.5% per year.
Will Amazon be the biggest stock of the 2020’? Or has it exhausted its options and become a saturated blue-chip stock? Here are the bull and bear cases for Amazon’s potential growth.
Reasons Why Amazon Will Be the Biggest Stock of the 2020’s
The foundation of why some may think Amazon still has room to grow lies within the opportunities presented from revolutionizing more markets and industries. Here are a few to consider.
Amazon only has 37% of the ecommerce market
Not to downplay that number by any means, they are clearly the market leader. But that also poses a 63% market opportunity.
As of 2019, the next-biggest e-commerce market leaders are eBay (NASDAQ: EBAY) owning about 6.1% of the market, Walmart (NYSE: WMT) owning 4.6%, and Apple (NASDAQ: AAPL) owning just 3.8% of the retail ecommerce market.
Amazon’s Grocery Store Market Opportunity
One industry that is a current work in progress for Amazon is it’s cashier-free grocery stores. Just walk in and grab your items and walk out. The items will automatically be charged to your Amazon account!
To give you an idea of the massive opportunity this could be, consider the size of the U.S. food retail industry – a whopping $5.75 trillion market. Furthermore, sales from grocery stores in the U.S. in 2017 were $645 billion.
Why do I bring this up? Well to start, it’s an industry that has been around forever and it seems that nothing has changed in how we purchase our groceries. The idea certainly has the potential to revolutionize how we shop for everyday items. Hey, they did it with e-commerce & cloud computing, they’re doing it with their logistics and shipping operations, why not take over the grocery store market too?
Reasons Why Amazon Will Not Be the Biggest Stock of the 2020’s
Taking over market share of other industries is no small task by any means, and currently that is where the largest growth opportunity lies with the sometimes trillion-dollar tech giant. Is it speculative to assume they will have the ability to revolutionize industries which already established companies have penetrated for decades?
Amazon’s Tried & Failed Attempts…
It may be a good sign if Amazon is attempting to win over a market or company growth opportunity, as it means you’re onto something big. However, Amazon has attempted and failed at many industries, including handmade products, the cell phone industry, the payments industry and digital wallets. How broad can Amazon stretch among different industries and still remain the market leader? Consider the following failed attempts from Amazon:
- Amazon Handmade:Amazon Handmade is a marketplace for buyers to purchase unique handmade items. With the growth of companies like Etsy (NASDAQ: ETSY), Amazon saw an opportunity to compete, but Etsy came out on top!
- The Fire Phone: Did you know that Amazon attempted to launch an Amazon Fire Phone? The cell phone market is no question a giant industry, but Amazon couldn’t stand to compete with market leaders like Apple and Android.
- Amazon Wallet: Amazon Wallet is a mobile wallet to store your loyalty cards and gift cards. It did not, however, have an option to store credit and debit cards (perhaps this was their reason for failure). After just six months of launching Amazon Wallet, the product was shut down.
Size DOES Matter — Here’s Why…
No, not in the way you’re thinking. Stay with us, we’re discussing Amazon stock. When it comes to company size, there is a lot to consider. When is a company so big that the growth opportunities are just too small in comparison to the overall company size?
For example, as of this writing, Amazon is currently valued at about $982 billion. Many of the markets that pose opportunities for Amazon to enter may have a total size of as low as $5 billion. Even if Amazon gained half of the market share, that would only be an additional $2.5 billion market opportunity, or just 0.2%!
At some point you get so big that any growth opportunity is just too small to grow much bigger than you already are…
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Contributing Writer at MyWallSt
Cameron Williams is a contributing writer here at MyWallSt and focuses on finance and investment-related topics.