Amazon (NASDAQ:AMZN) has proven to be a buy-and-hold-forever investment, and there’s plenty of historical data and performance metrics to back up this claim. Since its initial public offering (IPO) in 1997, Amazon’s stock has skyrocketed.
Adjusted for splits, the stock debuted at around US$1.50 per share. Fast forward to today, and we’re talking about a stock price that has soared to over US$3,000. That’s an astronomical increase of more than 200,000%! If you had invested just $1,000 at the IPO, you’d be sitting on a fortune now.
Is it still a buy-and-hold stock? Let’s look at two reasons why that’s a major “yes.”
Past performance means current dominance
Amazon’s financial performance has been nothing short of stellar. In 2020, during the pandemic, while many companies struggled, Amazon thrived. Its net sales jumped 38% year over year to US$386 billion, and net income more than doubled to US$21.3 billion. This growth wasn’t a one-off. Amazon has consistently delivered strong earnings growth over the years, driven by its diversified business model.
Speaking of diversification, let’s look at Amazon Web Services (AWS). AWS is Amazon’s cloud computing arm, and it’s a real cash cow. In the first quarter (Q1) of 2021 alone, AWS brought in US$13.5 billion in revenue, up 32% from the previous year. AWS’s operating income was a whopping US$4.2 billion, accounting for more than half of Amazon’s total operating income. This segment’s impressive performance underscores Amazon’s ability to generate profit from multiple sources.
But what about Amazon’s e-commerce business? Well, it’s been a dominant force globally. During the pandemic, consumers flocked to online shopping, and Amazon was their go-to platform. Its Prime membership program, offering perks like free shipping and access to streaming services, has been a key driver of customer loyalty. As of 2021, Amazon had over 200 million Prime members worldwide, each contributing to recurring revenue.
Lastly, consider Amazon’s robust logistics network. The company’s ability to deliver products swiftly and efficiently is a testament to its operational excellence. In 2020, Amazon spent US$44 billion on shipping, highlighting its commitment to customer satisfaction.
Future favourite
According to Synergy Research Group, AWS holds about 32% of the global cloud market share, towering over competitors. With the cloud computing market expected to grow at a compound annual growth rate (CAGR) of 17.5% from 2021 to 2026, AWS is set to ride this wave. As more companies migrate to the cloud, AWS’s growth potential remains enormous.
Next, let’s dive into Amazon’s e-commerce behemoth. For instance, Amazon Prime, with over 200 million members globally, offers unbeatable value with perks like free shipping, Prime Video, and exclusive deals. This kind of customer loyalty ensures a steady stream of recurring revenue.
Let’s not forget about Amazon’s advertising business. It’s a lesser-known gem but incredibly lucrative. Amazon’s advertising revenue hit US$7.9 billion in Q1 2021, a 77% increase from the previous year. With its treasure trove of consumer data, Amazon offers highly targeted advertising solutions that are increasingly attractive to marketers. This segment’s rapid growth adds another layer of profitability to Amazon’s diverse portfolio.
Finally, consider Amazon’s international expansion. While already a global powerhouse, Amazon continues to penetrate new markets. Countries with growing middle-class populations present vast opportunities for Amazon’s e-commerce and AWS services. For instance, Amazon’s recent investments in India and Southeast Asia are paving the way for future growth in these burgeoning markets.
Bottom line
To sum it all up, Amazon’s past market performance is a compelling reason to buy and hold its stock forever. With its impressive growth, diversified revenue streams, strategic innovations, and customer-centric approach, Amazon has proven time and again that it’s not just a company; it’s a phenomenon.
And even now, Amazon’s future growth opportunities are as vast as they are varied. From dominating cloud computing with AWS, revolutionizing e-commerce logistics, and disrupting health care, to innovating in physical retail and expanding internationally, Amazon is a juggernaut. So, hold on tight and enjoy the thrilling journey ahead!
