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What's Next for Amazon?

Written by Briton Ryle
Posted September 10, 2018 at 2:13PM

Let's start with two things.

  1. $1 trillion
  2. This chart:

This chart shows you Amazon's incredible run to becoming just the second company to ever be worth $1 trillion. A freaking trillion.

Back in 2010, you could've bought the shares for $120 apiece. A week ago, they hit $2,040 as revenue hit $200 billion. Yeah. Investors made a fortune.

Now, it's not like nobody ever heard of Amazon before. It's been pretty much THE destination for e-commerce for 15 years. So how has the stock managed to double in the last year (and triple in the last three) to get to that incredible $1 trillion valuation? And more importantly, can you still make any money off Amazon? 

I'll tell you right off. The answer to the second question: You absolutely can still make money off Amazon. I'll tell you more about this in a minute because this can be the cornerstone of any investment portfolio. But to really get a feel for how powerfully Amazon can affect your wealth and even your retirement, let's start with the question of how Amazon got to that trillion-dollar level.

Ask Not for Whom the Amazon Bell Tolls...

It wasn't all that long ago that Amazon was kind of "just another company." Yeah, it was an important e-commerce destination. Yeah, founder/CEO Jeff Bezos was doing a pretty good job. But online retail is a somewhat easy thing to do. Amazon wasn't exactly seen as a revolutionary company. (Back in 2010, when those shares were $120, Amazon was doing around $35 billion in annual revenue.)

That perception changed about two years ago.

First, the brick-and-mortar crowd started missing revenue and earnings expectations. Target, for instance, fell from up around $80 down to just above $50. Amazon kept right on beating its numbers (~30% year-over-year revenue growth), and it became clear that the company was posing a serious challenge.

I'd say it was when Amazon bought Whole Foods that the entire investment world uttered a collective, "Ohhhhh, now we get it." It was right about that time — summer of 2017 — that annual revenue hit $150 billion. 

That growth proved Amazon could beat the Targets and Walmarts of the world. And the Whole Foods purchase suggested Amazon could take on any type of sales... and win. Revolutionary. 

I will admit, when I wrote this article for Wealth Daily saying that despite its $900 share price, Amazon was actually cheap, I didn't really get that Amazon was taking on the whole world. It hadn't even bought Whole Foods yet. I was simply talking about revenue growth, cash flow, and net profits...

To make a long story short, my article showed that a cursory glance at Amazon's financials back then made it look like a typical low profit margin retailer. But if you really dug into the numbers, it became clear that Amazon was investing a huge amount of money in the business at the expense of net profits. I suggested that Amazon could easily report twice the net profits basically anytime it wanted to. And it's happening right now...

When I wrote that article, Amazon had posted consecutive net profit growth of 52% and 38%. Great. Solid numbers. But get this: In the last three quarters, Amazon has put up profit growth of 144%, 120%, and — drumroll, please — 1,117%!!

Over 1,000% profit growth is absolutely an "are you kidding me?" number.

So Now What?

Now, we go back to that chart. $2,000 a share. $1 trillion valuation...

Amazon has been discovered. We now know that Amazon isn't just any old e-commerce company. It is truly a revolutionary company that will be exerting more and more influence in the U.S. economy and in the stock market in the years to come. 

But at $2,000 a share and $1 trillion in valuation, it is fair to wonder what the immediate upside is. Are we going to see a straight shot to a $2 trillion valuation? 

Honestly, it seems like a reach to expect this type of performance for the stock to continue unabated. However, all is not lost...

You see, the reality is that Amazon has not hit this level of dominance alone. Sure, it gets all the headlines. And it's gotten the lion's share of stock price gains so far...

But behind the scenes, there are a select few undiscovered companies that are helping Amazon become the undisputed heavyweight champion. Incredibly undervalued and ignored, it is just a matter of time before the rest of Team Amazon hits the big time. And there are years of growth to come for them as Amazon expands into new businesses. 

I've got an urgent presentation about these companies coming out tomorrow. If you want to be part of the next round of massive Amazon profits, don't miss it.

Until next time,

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Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.

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