In the e-commerce industry, one of the most well-known names is Amazon. With its fast and convenient delivery, reliable customer service and perk-filled Amazon Prime membership, it’s an e-commerce giant to be reckoned with despite its humble beginnings as an online bookstore.
Now with a huge competitive edge in its core services, constantly increasing market cap, positive investor sentiment and visionary leaders like CEO Andy Jassy and founder Jeff Bezos, it’s easy to understand why this company is one of the most valuable in the world.
|Amazon: Company Snapshot|
How Much Is Amazon Worth Now?
Many companies suffered — and continue to suffer — during the coronavirus pandemic, yet Amazon positioned itself as a lifeline for millions of consumers. As a result, it’s now valued well above $1 trillion in market capitalization, a milestone it reached for the first time in 2018.
With a 52-week low share price of $2,707.04 and a high of $3,773.08, Amazon’s market capitalization has fluctuated over the last year. At its closing share price of $3,065.87 on Feb. 11, the company’s market capitalization sits at $1.56 trillion.
What Is Market Capitalization?
Market capitalization is often used by investors to determine a company’s value. To calculate market cap, multiply the number of outstanding shares by the current stock market price. Although market capitalization can help determine a company’s value, it’s not always the most accurate. It does not take into account a company’s financials. Share pricing can fluctuate, affecting the figure.
Take a look at three areas that contribute the most to Amazon’s true valuation:
- Economic moat and competitive advantages
- Market cap, revenue and outlook
- Leadership and executive team
What Is Amazon’s Net Worth?
The GOBankingRates company net worth is a more conservative valuation than most, taking into account only full-year profits and revenue from the last three years and the company’s assets and debts.
By this measure, Amazon’s net worth as of the quarter ending Dec. 31, 2021, was $438.118 billion.
|What Is Amazon Worth?|
|Share Price, 52-Week Range||$2,707.04-$3,773.08|
|Fiscal Year 2021 Revenue||$469.82B|
|Fiscal Year 2021 Profit||$33.364B|
|GOBankingRates’ Evaluation of Amazon’s Net Worth||$438.118B|
|52-week-range data is accurate as of Feb. 14, 2022.|
Amazon is one of the few trillion-dollar companies in the world. In 2020, after a great earnings report, the company made a return to the $1 trillion club, joining the ranks of Apple, Microsoft, Alphabet — the parent company of Google — and, intermittently, Tesla. Amazon’s revenue in 2021 was $469.82 billion, up 21.7% from $386 billion in 2020 and increasing by orders of tens of billions yearly.
Amazon’s stock now sits at $3,065.87 per share, bringing the market cap to $1.56 trillion as of Feb. 11, 2022. This is a reliable indicator of its current worth and the investor sentiment around Amazon, even if it’s too high for its current revenue and sales. Despite Amazon’s success, stocks with overly high valuations in the stock market should still be bought with caution.
In perspective, much of the stock market has had a high P/E ratio in the past few years, so this shouldn’t be a worry as its future outlook — a large factor in both institutional and retail stock investment — is very promising. Revenues are rising by large percentages annually, there is continued outperformance and competitive advantage and leadership continually innovates while sticking to the same principles that worked for decades.
Amazon’s Economic Moat and Competitive Advantages
An economic moat, a concept successful investor Warren Buffett and CEO Bill Gates use to invest, occurs when a company has a huge market advantage over its competitors. Buffett would typically invest in a company that has an economic moat, but Amazon has more than one.
A Look at Amazon’s Many Moats: Prime, Logistics and More
Although existing competitors can do bits and pieces of what Amazon does, Amazon’s core e-commerce business and logistics ability are economic moats. As such, there will be no competition that can match it in its entirety anytime soon.
The most obvious is Amazon’s Prime membership, which is all-encompassing in addressing customer needs. From free, fast shipping, to Prime Entertainment, to the Amazon Prime credit card with 5% rewards, the Prime membership is a large contributor to the value. It feeds into itself, keeping customers hooked on both shopping with Amazon and paying the monthly or annual subscription for the 5% credit card rewards.
To accomplish its shipping speeds, Amazon also maintains an economic moat in logistics. Its Fulfillment By Amazon business that connects to its Marketplace and Prime — its other moats — leverages its large-scale operation to solve inefficiency and cost. This moat leaves Amazon well positioned to ride out the pandemic-spurred supply chain issues currently challenging manufacturers and retailers.
This is not to mention Amazon’s competitiveness in many other areas. Among the more successful of these are Prime Video — a streaming service that competes with Netflix and comes bundled with a Prime membership — and cloud computing services like Amazon Web Services, which competes with Microsoft Azure.
AWS is in the spotlight for its decisive market dominance. As of the third quarter of 2021, AWS had 32% of the cloud provider service market share, while Microsoft Azure had 21% and Google Cloud had 8%, according to Statista. What’s more, AWS revenue grew 40% in 2021.
The Positive Business Effects of COVID-19
Its revenue and worth have only gone up as its stock continues to rally, especially as Amazon stepped up to the plate amid the increased online buying during the COVID-19 pandemic. The company’s net sales grew 9% in the fourth quarter of 2021 compared to the same quarter of 2020 and surged 22% for the year. To keep retail sales strong, Amazon pushed Prime Day forward to Q2, giving consumers a head start on holiday shopping. And the push continued, resulting in Amazon’s most successful Black Friday to Cyber Monday sale ever, in terms of both its own retail sales and those of its third-party sellers.
Due to its great success in emerging as a reliable top player in the pandemic, along with many other companies that came out on top, Amazon’s stock climbed higher. However, the company tempered revenue expectations for the first quarter of 2022, noting in its earnings release that its estimates reflect the impact of the pandemic on its operations. Amazon expects to see 3% to 8% growth, totaling $112 billion to $117 billion, in Q1 2022.
Amazon’s Founder: Jeff Bezos
Jeff Bezos walked away from his career as an investment banker to open Amazon, an online bookstore, out of his garage. He managed to expand beyond books by diversifying into other retail products including music CDs and electronics such as Kindle. He also introduced the Amazon Web Services — AWS — division, which has become the largest cloud-computing service in the market.
Amazon’s CEO: Andy Jassy
Andy Jassy, president and CEO of Amazon.com, took the helm in July 2021. He’s the founder of Amazon Web Services and served as its CEO for over five years before replacing Bezos as CEO of Amazon. As part of his compensation package, Jassy received 61,000 shares of Amazon stock, worth over $187 million at today’s price, vested over a 10-year period. That’s in addition to the 0.02% of Amazon stock he owned previously, CNBC reported.
Top 10 Shareholders
Amazon is primarily held by institutions. The top 10 firms are:
- The Vanguard Group Inc., 6.54% of shares
- Blackrock Inc., 5.64% of shares
- T. Rowe Price Associates Inc., 3.22% of shares
- State Street Corporation, 3.21% of shares
- FMR, LLC (Fidelity), 3.05% of shares
- Geode Capital Management LLC, 1.38% of shares
- Northern Trust Corp., 0.97% of shares
- Morgan Stanley, 0.95% of shares
- JPMorgan Chase & Co., 0.90% of shares
- Norges Bank Investment Management, 0.90% of shares
How Does the Future Look for Amazon?
Though Jeff Bezos has stepped down, someone just as competent and ambitious filled his shoes. Having been at Amazon for 25 years — from the very beginning, when it was a tiny startup with no office — Jassy is just as much a visionary as Bezos, who has stayed on as an advisor and board member.
Amazon’s earnings easily surpassed analysts’ expectations for the fourth quarter of 2021, with $5.80 earnings per share vs. $3.57 expected, according to CNBC.
Despite the strong financial results, the fourth quarter of 2021 was a challenging one due to labor shortages and inflationary pressures, with Omicron extending the impact into the first quarter of 2022.
Amazon had prepared investors for the fourth quarter to be an expensive one as it expanded shipping ports as well as its transportation fleets in response to supply chain bottlenecks. Those efforts as well as inflation and higher labor and shipping costs were expected to result in “several billion dollars” of extra costs, according to Jassy, as reported by CNBC. Perhaps as a result of that guidance, the markets appeared unbothered by fourth-quarter revenue falling slightly short of expectations — the stock was up as much as 14% in after-hours trading following the earnings release, according to CNBC.
Jassy pointed to the extraordinary growth of AWS, the addition of new marquee entertainment to its streaming services and expanding capabilities Amazon is building in products and services like Alexa, Ring, Amazon Pharmacy and Amazon Care as examples of successes the company achieved in 2021. In addition, ad revenue was strong enough last quarter that Amazon reported it separately — rather than as part of “Other” sales — for the first time, the earnings report noted.
Jassy also announced that Prime membership fees would increase from $119 to $139 for annual subscriptions and from $12.99 to $14.99 for monthly subscriptions. Amazon had over 200 million subscribers as of April 2021.
Good To Know
Also telling is the fact that shortly after taking over as CEO, Jassy announced a global effort to hire 55,000 new employees for corporate and tech roles to keep up with demand in retail, cloud, advertising and other businesses. Then, just prior to the start of its job fair that began Sept. 15, the company announced it would actually hire 125,000 employees in the U.S. alone and offer perks like $3,000 sign-on bonuses in select locations and full college tuition for 750,000 operations employees.
As GOBankingRates reported on Feb. 8, Amazon is increasing its base pay to $350,000 for corporate and tech workers, according to an internal document verified by GeekWire. The increase is likely spurred by the high turnover Amazon experienced in 2020 and 2021 — a situation undoubtedly made worse by labor shortages resulting from the pandemic.
Amazon likely has a bright future as it continues to dominate online retail and cloud services, maintains a strong showing in online media, home automation and other products and services — and just as importantly, continues to make Amazon a better place to work.
Is Amazon Worth the Money?
Despite some bumps due primarily to the pandemic, Amazon could be a solid long-term investment. Among 47 analysts weighing in on Yahoo Finance, 43 rate Amazon a “buy” or “strong buy,” and none of the analysts rated it a “sell.” The average price target for the next year is $4,101.90 — up slightly since last quarter — in a range of $3,333 to $5,000. At a current share price of $3,065.87, the stock has very solid potential by even the more conservative projections.
Data is accurate as of Feb. 14, 2022, and subject to change.
Methodology: The GOBankingRates Evaluation assesses a company’s net worth based on the company’s total assets, total liabilities, and revenue and net income from the last three years. Base value is established by subtracting total liabilities from total assets from the company’s last full fiscal year. Income value is established by taking the average of the revenue from the last three full fiscal years, plus 10 times the average of the net profits from the last three full fiscal years, and then calculating the average of those two figures. The final GOBankingRates Evaluation number is the sum of the base value and the income value.