Amazon.com is now a larger company than ever. Its stock climbed above $1,000 per share for the first time last week. Surprisingly AMZN is already up 34% so far this year. Although $1,000 is merely a number, it does represent a major psychological barrier for investors and traders. “The world is becoming more and more aware of how unstoppable the business plan is,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in New York. For disclosure, he mentioned that Amazon shares accounts for up to 5% of the company’s portfolio.
Among the other large U.S. companies by market cap, Apple and Facebook share prices have also risen by about 34% this year so far. Just like with Amazon, shares of Google’s parent company Alphabet (GOOGL), have also surpassed $1,000 now. It comes just 6 days after Amazon crossed the same threshold. It demonstrates a strong message that tech giants can outmatch older companies. Both AMZN and GOOGL continue to climb once they broke the $1,000 per share mark. Alphabet has been reluctant to split its stock. A split would make a company’s stock more affordable. Alphabet’s transition just under 2 years ago to a portfolio structure has also increased investor’s confidence in the company’s future potential. Shares of GOOGL gained $4.91 on Wednesday earlier this week to close at $1,001.59.
Amazon was started in a garage by founder Jeff Bezos. The idea first came to him while he was working at the Wall St. firm called DE Shaw and Co as vice president. David Shaw, an investor and computer scientists who also worked at the company has used the internet during the early 1990s. He saw potential of the internet in the future. Bezos also saw the potential of the internet and noticed the rapid increase in users. During discussions between Bezos and Shaw the concept of an online store with an unlimited selection of products came up. This was the idea for Amazon.com. But as a startup company, selling everything under the sun would be impractical. So Bezos narrowed down the list to 20 categories, at least to start. These product categories include books, computer software, office supplies, apparel, and music. Amazon began in 1996. It was named after the longest river, the Amazon. Jeff Bezos wanted his business to be the biggest in the world.
Looking at the company’s financial history it is not surprising that the stock has grown so much over the last few years. In 2014 the company made $89.0 billion of total revenue and $26.2 billion in gross profit. The following year in 2015 Amazon topped $100 billion in sales, selling $107 billion worth of goods and services, and ending the fiscal year with $35.4 billion of gross profit. Finally last year, it made $136.0 billion of total revenue, and $47.7 billion of gross profit. Not only is Amazon growing its top line, but it has also managed to increase its gross profits over time.
One of Amazon’s largest growing division is its Amazon Web Services. This is a service that provides on-demand cloud computing platforms to both individuals, companies and governments, on a paid subscription basis with a free-tier option available for 12 months. Amazon Web Services (AWS) started small back in 2002. But it is quickly growing. In 2016 Q1, revenue was $2.57 billion with net income of $604 million, a 64% increase over 2015 Q1 that resulted in AWS being more profitable than Amazon’s North American retail business for the first time. During the first quarter of last year, Amazon experienced a 42% rise in stock value as a result of increased earnings, of which AWS contributed 56% to corporate profits. With a 50% increase in revenues the past few years, AWS is predicted to have $13 billion in revenue in 2017. Amazon may be an expensive stock to buy at this time, but many investors are still attracted by its strong financial growth.