For Amazon (NASDAQ: AMZN), the past year must have been dizzying.
One can only soar upward so fast without getting whiplash.
But if the retail giant is phased by rapid growth, it doesn’t show it. In fact, the company hasn’t taken a single breather on its path to dominance.
And the market is taking note.
Amazon’s stock hit a record high on Wednesday, nearing $1,000 a share. It’s likely that Amazon will hit the $1,000 dollar mark soon — barring something catastrophic.
Other major retailers fell short in their first quarter earnings. This included Macy’s and JCPenney, two companies that have lost foot traffic to the online giant.
Amazon had a very strong first quarter earnings report, growing in almost every division. Amazon’s cloud computing service AWS is slowly growing despite a competition-saturated market.
The company also managed to snag a deal with the NFL, buying the rights to stream all major football games through their PRIME service.
Now as we approach the $1,000 mark, many investors are getting wary. It’s rare for a company to grow as dynamically as Amazon — Its stock has gained $300 dollars in the last year.
Some worry that Amazon’s rapid growth is a symptom of an overhyped stock set to bust.
And it’s true, Amazon is overvalued by retail industry standards. The company is currently at a price to earnings (PE) ratio of 183.6x. The average in the retail industry is 80.6x.
So based on fundamentals, Amazon’s value spells trouble.
But at this point, you also have to remember that Amazon is not your normal company. It’s a retailer unlike anything the world has seen before. In its e-commerce space, it will never be beaten.
Investors who are concerned about Amazon’s stock price should take a close look at the company’s earnings report.
One of the most promising parts of Amazon’s earnings report was their continued commitment to long-term growth through technology adoption. You can see this in their aggressive marketing of Alexa, a move that will one day allow them to dominate the smart home.
Consumers are heading toward a life of leisure. We have grown accustomed to booking rooms and ordering food through our phones. Soon we will be able to order household goods through our smart home assistants.
And the most popular home assistant is Alexa. The voice assisted speaker makes up 77% of all home assistants purchased.
This means limitless profits for Amazon, which will become a major supplier of household goods. Ordering a new roll of toilet paper will become as simple as, “Alexa, could you please order….”
Amazon’s long-term goal is to be more than a retailer. It wants to supply household goods and home services. So far, the company has proven that it can do both these things efficently. That is Amazon’s long-term plan and potential.
So for those concerned by Amazon’s valuation moving forward, don’t be. It’s hard to measure the company against its sector because it is redefining what we consider retail.
The best we can do is invest wisely and move forward alongside it.
