After Apple, Amazon reached the 1 trillion mark - September 16, 2018
Amazon reached and crossed the magic $1 trillion evaluation barrier. This happened just weeks after Apple became the first US company to cross the same market capitalization. While Apple was able to remain above the trillion-mark, Amazon soon dipped back around $970 billion. But they have a bright future in front of them.
At the beginning of August, Amazon crossed the $1 trillion market capitalization and became the second American company to do so.
Amazon’s record growth
For a while now, we’ve been expecting Amazon to break the $1 trillion barrier, but the speed of the company’s growth was surprising. It took only 165 trading days for the company to grow from $600 billion in January to $1 trillion. This means that they almost doubled their market capitalization since the beginning of the year.
Amazon is also among the best performing FAANG stocks. Since 2009 (the beginning of US stock market’s historical bull run), the online retailer grew more than 3000%. There is only one company that outgrew them among the FAANGs: Netflix. (The total market capitalization of the streaming company is far less than Amazon’s, though.)
The reasons behind success
Although most people know Amazon as an online retailer, they have a lot going on behind the scenes. The company is one of the most important cloud service providers on Earth for example. AWS (Amazon Web Services) is used by companies like Adobe, Comcast, Ryanair, Vodafone, and the aforementioned Netflix. What’s more, AWS brings in the most money for Amazon. It also operates with a much higher margin than the online shop itself (20-25% versus 3-4%).
Furthermore, Amazon’s online shop only made losses for a long time. Now the online shop is profitable too, so the company is also trying to enter the brick and mortar industry. Last year they bought Whole Foods Market for almost $14 billion and their stock prices instantly started to rise. Amazon is also pouring money into content creation and trying to make Prime Videos better and better. They already won a primetime Emmy with their show “Transparent”.
Diversification helps and will help
Although Amazon’s market cap soon dipped back under $1 trillion, they still have a bright future. At the time of writing this post, their market cap is around $970, which is still really close to the magic number. They may break it any time again, and may even be able to stay above it, like Apple did.
They have a great chance to do so as their business is seriously diversified and they all perform better and better. No wonder analysts believe that this diversification is a huge driver behind Amazon’s success lately.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.