According to the data compiled for Abra’s first Global Investor Insights, Amazon stock is one of the most popular assets among investors using the Abra app.* Investors are excited by Amazon for the company’s ability to continuously develop new products and services related to digital retail, media production and consumption, digital publishing, and for the company’s ability to move into other verticals and industries and be successful. Amazon acquired the popular Whole Foods Markets, a physical grocery store chain, in 2017.
What is Amazon?
Normally when you define a company you point to a few key identifying characteristics. Like the company makes X or provides Y service. With Amazon, it might be easier to define the company by talking about what it doesn’t do. The reason? Amazon touches so many different kinds of industries and verticals that it defies any simple characterization or definition.
Sure, Amazon is a digital retailer with a reputation for making just about every known product available to consumers. But Amazon is so much more than just a digital marketplace. It is also a tech company that specializes in logistics, digital publishing, media and entertainment, and in recent years Amazon even produces its own products for sale — and Amazon has acquired a number of high profile subsidiaries such as the digital clothes and footwear retailer Zappos, and the brick and mortar grocery chain Whole Foods Markets.
Amazon began as a garage-based business by Jeff Bezos on July 5, 1994. Bezos started the company by selling books through a digital storefront because books were easy to store and ship. Over time, Amazon started selling other items for third-party sellers, eventually overtaking other popular US-based retailers such as WalMart.
In addition to the retail side of the business, Amazon is also a media content creator and publisher and now controls several branded verticals such as Prime Video, Kindle publishing (for electronic books), and Amazon Music. Not only does Amazon work with content creators and even owns studios that produce original movies and television, but the company also makes technology to consume the media, like specialized tablets and e-readers.
Additionally, Amazon provides other digital cloud infrastructure under its Amazon Web Services umbrella, which is discussed in more detail below.
Stock symbol: AMZN
Headquarters: Seattle, Washington USA
Availability: Amazon is available worldwide, although many of its services are focused on North America. Just recently, the company surpassed 100 million memberships for its Prime services in the United States.
Business model: Amazon has three identified divisions: North America, International, and Amazon Web Services (AWS). All of the company’s retail, media production and distribution, technology, and membership services fit into one of these categories. The company generated $232.887B in revenue in 2018, which was nearly a 31 percent increase from the year before.
While Amazon often gets attention for the retail and media side of its business, Amazon Web Services ranks in the top five of cloud-based software providers. The AWS division accounted for $25.6 billion in revenue in 2018. AWS offers key services for businesses of all sizes including computing, storage, database, analytics, and developer tools.
Risks: In its most recent annual report published in 2018, Amazon explains one of the main risks to its business as fierce competition from other retailers and from companies operating in the digital services space. “Our businesses are rapidly evolving and intensely competitive, and we have many competitors in different industries, including physical, e-commerce, and omnichannel retail, e-commerce services, digital content and electronic devices, web and infrastructure computing services, and transportation and logistics services, and across geographies, including cross-border competition. Some of our current and potential competitors have greater resources, longer histories, more customers, and/or greater brand recognition, particularly with our newly-launched products and services and in our newer geographic regions. They may secure better terms from vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing,” according to the annual report.
Interestingly, in the same report, Amazon also says that the company’s success and continual growth over the past 25 years is also the source of potential business risk. A generation of continual growth is taxing administrative and infrastructure resources. Also, the report noted, as the company continues to grow into new geographies it creates additional administrative burdens and business risks.
Unlike the profiles of other companies that stress specific threats, Amazon’s most recent annual report stressed that one issue it is facing is the paradox of success. The company has grown so large, so fast, that it might be hard to sustain growth into the future.
Amazon has moved from a garage startup to one of the top five internet-based companies over the last 25 years. During that time the company has hit setbacks, but those were usually tempered with continual growth and impressive acquisitions.
While it’s never a good idea to make future investments based solely on past successes, Amazon has built a solid footing of diversified business streams. More than a digital retailer or a media production company, Amazon also supplies valuable infrastructure and services to internet-based businesses via its Amazon Web Service platform.
While the company itself has acknowledged that too much growth can come at a cost, it will definitely be interesting to see what the future has in store for Amazon.
Amazon has a great selection of annual reports and other investor updates available on its investor relations website.