We have been introducing coverage of a number of new companies for subscribers over the past several months – Meta Platforms (f.k.a. Facebook), Alphabet, Microsoft, Hargreaves Lansdown. Most recently, we introduced detailed coverage of Amazon, the US-based e-commerce retailer.
Amazon was founded by Jeff Bezos in 1994 in Seattle, Washington. Initially an online marketplace for books, it has over time expanded its product range and entered into new fields such as cloud computing (Amazon Web Services), music & video streaming, and advertising.
From modest origins in the early 90s, Amazon now has a market value of $1.4 trillion and generates almost $500 billion in annual sales – truly, the everything store!
Amazon’s success has been driven by Bezos’ laser-sharp, relentless focus on delivering the best possible experience for customers. Perhaps most famously, Bezos introduced the ‘Prime’ membership, which allowed subscribers, in return for a monthly fee, to avail of next-day delivery on millions of items. In effect, Prime reduced or eliminated many of the frictions in online shopping and cemented Amazon’s dominance in the space. Over the years, Amazon has added many enticing perks to Prime and now has over 270 million subscibers worldwide.
Of course, Amazon has benefitted tremendously from the huge shift in retail from bricks & mortar to online spaces. Since 2000, online retail sales in the US have grown 18% annually to over $1 trillion in 2022 – and still only represent 16% of total retail sales.
This relentless focus on the consumer, coupled with the tailwind of increasing online retail, has grown Amazon’s sales and earnings by a mind-boggling 29% and 37% annually over the past fifteen years. This is an unprecedented rate of growth over the long-term, and puts Amazon firmly in the pantheon of the world’s most successful companies.
Reflecting this success – along with predicted strong growth in its cloud computing and advertising segments – the shares trade at an expensive price-to-earnings multiple. Of course, high growth can rapidly bring down high valuation multiples – if high growth can be sustained. But history shows that markets are swift to punish highly valued companies if growth simply slows down, never mind turning negative!
Our full 27-page note on Amazon – including our investment conclusion – is available to subscribers on the GillenMarkets website. Subscribers get access to all of our in-depth research into stocks and funds, as well as the latest insights on markets, and model investment solutions for DIY investors. If interested, you can click on the link above for more information, or email email@example.com to arrange a free trial.