4 Reasons To Buy Amazon Before It Hits $2000 In 2019 – Forbes
On May 30, Amazon stock topped $1,000. This got some media attention as will another nice round number: $2,000 a share — whichÂ I think its stock will hit in 2019 if it keeps going up at 40% aÂ year. (I have no financial interest in the securities mentioned in this post).
Are you going to wring your hands and worry about how its shares are over-valued at a forward Price/Earnings ratio ofÂ 65 or will you throw in the towel and buy because you suspect Amazon will keep growing revenues faster than the 20% that most investors expect?
If you can find a better CEO on this planet — or any other — you can invest in her. But until then, nobody beats Bezos. As I pointed out in Disciplined Growth Strategies, companies that sustain 20% or higher growth after theyÂ hit $10 billion in revenue share four traits — which Bezos brings to life:
- He’s a founder who propels his public company — something he’s been doing for two decades;
- He leads enormous markets by giving consumers a better deal;
- He attracts and motivates the most talented people in the world through his vision, charisma, and ability to execute; and
- He keeps investing in growth opportunities — learning from failures and expanding where he finds success.
Here’s why each of these factors lead me to believe Amazon will be able to sustain its 40% annual stock price growth.
I have little to add to all the hagiography about Bezos whose wifeÂ drove him across country to Seattle in 1994 as he typed a business plan for an online book store.
But his success and that of other entrepreneurs — like Bill Gates, Mark Zuckerberg, Larry Page and Sergey Brin, and Reed Hastings — who have gone on to run successful public companies are among the handful of individuals who are ideally suited to the American economic system.
Simply put, there is no way to make more money in America than to start a company, take it public, and keep it growing at better-than-expected growth rates for decades at a time.
There is a flip side to the great leader theory of capitalism — as we saw in the case of Microsoft, it is nearly impossible to replace the great leader with an individual who can do as well or better.
That means investors should expect Amazon stockÂ — which has soared over 499,000% since its 1997 IPO — to wit, a $1,000 investment on Amazon’s first day of trading in 1997 would have been worth more than $500,000 on May 30 — to stop going up should Bezos leave the CEO slot at Amazon.
Winning in Enormous Markets
Amazon is a leader in many industries — two of which stand out.
At roughly $395 billion, ecommerce accounted for 11.7% of the $3.4 trillion retailing market, according to the Department of Commerce. And Amazon — with 33% of that market, according to Euromonitor — drove about 66% of 2016’s e-commerce growth.
Then there is the $30 billion cloud services market. Amazon controlled 40% of that, according to Synergy Research, after posting 55% growth and hitting $12 billion in AWS revenue in 2016 — beating projections by $2 billion, according to Geekwire.
Amazon’s lead in these markets has something to do with its ability to deliver great customer service. According to the American Customer Satisfaction Index, AmazonÂ beats its rivals with a customer satisfaction score of 86 — a lead it has sustained for the last 16 years.
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