Just recently, Amazon.com, Inc. has been rising on top of NASDAQ, as it is set to take on the world. In fact, it seems that Amazon is doing great at everything, from streaming to groceries to its retail business. The stock prices reflected on AMZN simply say it all.
Basically, stock prices of its competitors have fallen behind it. Even a lot of cities have offered huge tax breaks in order to secure a 2nd headquarters. That said, a pattern of history seemed to be emerging to repeat itself, which could lead to a future loss for the AMZN stock.
Based on the path that Wal-Mart Stores Inc has taken, Amazon is seen to be taking the same route. Wal-Mart has enabled its supply chains emerge from obscurity and gain the power to force suppliers cut costs. Thus, it has made the retail business soar high just like Amazon is today.
The problem was that other companies were able to surpass Wal-Mart, particularly on quality of products. Additionally, Wal-Mart’s popularity and stock prices went down after issues of poor working conditions. Similarly, this has been observed as the pattern that Amazon is in today.
Thus, Amazon has also failed in different areas and on many occasions. Likewise, its poor working conditions even became more frequent, as well as its stories of product failures that emerged. As a matter of fact, its Amazon Fire mobile device was not able to outrun its competitors. This was also seen in its failure to defeat Square Inc in the credit card reader market.
Nevertheless, Amazon has kept its reputation for growth and success despite its failures. This has enabled the Amazon stock price to surpass its competitors. In fact, it trades almost 300x its current earnings. In addition, its revenue growth is on the average of 23% annually in the past 5 years.
Accordingly, this should be an incredible feat for a company having a market cap that is nearly $550 billion. Based on statistics, the net income of Amazon has increased by 30% within the 5-year period. The high growth metrics of Amazon has led to the 22x increase in book value.
If you are concerned about the possible decline of Amazon, then you are mistaken. This is because popular competitors’ stocks have declined with the presence of Amazon in the markets that it has competed in.
Well, Amazon has not followed the footsteps of Wal-Mart entirely. The decline of Wal-Mart was long after the passing away of its founder Sam Walton. Moreover, the decline happened over several years. So, analysts of Amazon are still optimistic that profits would double in the future.
Nevertheless, a double-digit growth might be difficult to uphold, particularly when the company is getting bigger. Currently, as the market closed, 3rd quarter earnings have reached 52 cents per share, breaking the consensus at an estimated 1 cent. Also, it has reported revenue of $43.7 billion, which is a 34% increase from 2016 of the same quarter still breaking the consensus at an estimated $42 billion. This has led to the price hikes of several Amazon stocks.