The tech leader still has plenty of arrows in its growth quiver.
Amazon (AMZN 0.73%) is one of my largest holdings. And I am a happy shareholder considering the amount of money it has made me over the years. The company does have its detractors. Some claim its current size severely limits its upside, while others argue that it is losing ground to some peers in the cloud computing market, making its outlook far more uncertain.
However, I remain bullish on the stock, and I don’t intend to sell my shares anytime soon. There are many reasons why. Let’s consider just one of them.
Image source: Getty Images.
Follow the leader
Amazon’s business spans multiple industries, including e-commerce, cloud computing, artificial intelligence (AI), advertising, grocery shopping, video and music streaming, and healthcare. Here’s something deeply impressive about the company: It has been able to establish itself as a leader, and oftentimes as the leader, in most markets where it has ventured. Amazon holds the lead in the U.S. e-commerce market and is the top player in the cloud computing industry as well.
In digital advertising, it is also near the top of the list. Even in video and music streaming, it has made a dent. Most corporations struggle to achieve a top market share — or even come close to that level — in a single industry. Amazon’s ability to do so across multiple platforms speaks volumes.
Here are at least two things it tells us. First, Amazon’s management team knows how to plan ahead and identify potentially attractive growth avenues. Second, Amazon has an internal culture of innovation. Both of these factors are prerequisites for any company to perform well over a long period of several decades.
Today’s Change
(-0.73%) $-1.71
Current Price
$230.82
Key Data Points
Market Cap
$2.5T
Day’s Range
$230.12 – $232.99
52wk Range
$161.38 – $258.60
Volume
24M
Avg Vol
45M
Gross Margin
50.05%
A vast runway for growth ahead
Amazon’s prowess also tells us several things about its future. The company is still seeking to make significant waves in new sectors, including healthcare. Considering its track record, there is a good chance it will eventually achieve success. Amazon Pharmacy has managed to disrupt the well-established businesses of industry leaders. And here’s something else that’s important. Most of the markets Amazon dominates still have significant long-term growth prospects.
E-commerce has captured less than 20% of retail transactions in the U.S., a figure that’s likely lower in most other countries. CEO Andy Jassy has noted that 85% of IT spending still occurs on-premises. That means cloud adoption is still relatively low, a trend that is expected to change over the next few decades. Jassy is also extremely bullish on AI, and we are still in the early innings of that revolution.
Amazon should be able to drive these tailwinds for many years to come, leveraging its leadership position, strong innovative capabilities, and economic moat from multiple sources to emerge as one of the winners. The company could deliver market-beating returns along the way. That’s why, as a shareholder, I am staying put.
