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 and revenue, positive investor sentiment, and visionary leaders like newly minted 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?
Amazon’s worth is currently $1.7 trillion. Many companies suffered during the coronavirus pandemic of 2020, yet Amazon positioned itself as a lifeline for millions of consumers. Based on a 52-week share price low of $2,951.95 and a recent all-time high of $3,719.34, the company’s market capitalization has been as high as $1.88 trillion this year.
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 net worth to figure out its true valuation:
- Economic moat and competitive advantages
- Market cap, revenue and outlook
- Leadership and executive team
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 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.
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. Despite the end of lockdowns and easing of COVID-19 restrictions, the company’s first-quarter net sales for 2021 surged 44% year over year to $108.5 billion, surpassing analysts’ projections. Net sales continue to grow, with an increase of 27% to $113.1 billion in the second quarter of 2021.
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 climbs higher.
Amazon’s Projected 2021 Revenue
Amazon is one of the few trillion-dollar companies in the world, having joined the ranks of Apple, Microsoft and Alphabet –the parent company of Google— in 2020 after a great earnings report. Its revenue in 2020 was $386 billion, up 38% from 2019 and increasing by orders of tens of billions yearly. Based on year-to-date revenue for 2021, Amazon could surpass 2020’s $386 billion.
|What Is Amazon Worth Now?|
|Share Price, 52-week range||$2,951.95 – $3,719.34|
|Market Cap, 52-week range||$1.44 trillion – $1.88 trillion|
|Fiscal Year 2021 Revenue||$221.6 billion|
|Fiscal Year 2021 Profit||$114.803 billion|
Amazon’s stock now sits at over $3,300 per share, bringing the market cap up to $1.69 trillion, as of Aug. 3, 2021. 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 is sticking to the same principles that worked for decades while not failing to continually innovate.
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 started the Amazon Web Services — AWS — division which has become the largest cloud-computing service in the market.
Top 10 Shareholders
Amazon is primarily held by institutions (59.23%). The top ten firms are:
- The Vanguard Group, Inc., 6.47%
- Blackrock Inc., 5.55%
- State Street Corporation, 3.15%
- T. Rowe Price Associates, Inc., 3.14%
- FMR, LLC (Fidelity), 3.04%
- Geode Capital Management, LLC, 1.31%
- Morgan Stanley, 1.11%
- Northern Trust Corp., 0.97%
- Norges Bank Investment Management, 0.91%
- JP Morgan Chase & Co., 0.97%
Good To Know
As of 2021, AWS has 32% of the cloud provider service market share, while Microsoft Azure has 20% and Google Cloud has 9%. AWS is in the spotlight for its decisive market dominance and the appointment of Andy Jassy, long-time head of the AWS division, to replace Bezos as Amazon CEO.
The Future: Is Amazon Worth the Money?
Though Jeff Bezos has stepped down, someone just as competent and ambitious filled his shoes. New CEO Andy Jassy was previously the head of the company’s most profitable sector, AWS.
Though AWS was initially an in-house solution to solve internal problems, a market opportunity was quickly sensed and decisively executed by these leaders. This gave Amazon an advantage of years over other major competitors like Alphabet and Microsoft, which released cloud services only in later years to get in on the booming cloud market share.
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 will stay on as an advisor and board member. Since Jassy is very similar to Bezos as a leader and spent time shadowing him, there is likely to be no change to Amazon’s work culture, execution or profits.
There is nothing to expect but continued growth and expansion of both its current market and any new opportunities and innovations similar to AWS.
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Information is accurate as of Aug. 3, 2021.