Investors try to pick winning stocks that can deliver strong returns over a long period of time. Over the past few decades, the technology and internet sectors have been a hotbed for these opportunities.
Look Amazon (NASDAQ: AMZN). Since its initial public offering in May 1997, the e-commerce and cloud computing giant has achieved a remarkable 190,000% return. This would have turned a $1,000 cash investment into a whopping $1.9 million today. An equal investment in the S&P500 or the Nasdaq Composite Table of contents would have led to a much smaller profit.
Let’s look back at this”Beautiful sevenThe path shares take to becoming one of the most dominant companies in the world, as well as some key factors in whether Amazon is worth your investment dollars today.
The incredible rise of Amazon
Jeff Bezos founded Amazon in Seattle in 1994 with the sole purpose of figuring out how to sell books online. Just three years later, the company entered the public market. In 1997, Amazon generated just $148 million in revenue. Its market capitalization at the end of that year was $1.4 billion.
27 years later, this company has emerged as one of the most prominent success stories in corporate America. In 2023, Amazon raked in a staggering $575 billion in revenue. And the company is worth $1.9 trillion.
But how did this company expand over the years to get to this point? The credit goes to Bezos and his management team.
Amazon has gone from just selling books online to selling millions of items in what seems like an unlimited number of different product categories. The website is so popular that it attracted 4.3 billion visitors in March. According to Statista, 38% of all online spending in the US goes through Amazon.
The company has invested heavily over the years in building its logistics infrastructure, which now allows it to provide fast and free shipping in a cost-effective manner that competitors cannot compete with. As a result, Amazon has become a platform for other direct-to-consumer companies to build and expand their own businesses.
This strategy of turning what was initially a huge expense into a revenue stream also applies to Amazon Web Services (AWS). This leading cloud computing platform served the data and technology needs of the company’s fast-growing e-commerce business. That’s when Bezos and his team realized that there might be other entities that would appreciate this kind of back-end on-demand infrastructure.
Last year, AWS posted $91 billion in annual revenue and $25 billion in operating income. And its customer list includes major companies such as Capital one financial, Toyota engineand State Farm.
In addition to online shopping and the cloud, Amazon has one of the best streaming services on the market with Prime Video. And the company generated $47 billion in digital ad revenue by 2023, lagging behind only Alphabet And Metaplatforms in the US This impressive track record makes you wonder what the future holds for Amazon.
Should You Buy Amazon Stock?
Based strictly on the size of the company, as reflected by its revenue base and current market cap, it’s reasonable to assume that Amazon won’t deliver anything close to the returns it has historically delivered. There simply aren’t any growth opportunities big enough to give this behemoth a major boost.
However, that doesn’t mean you should avoid the stocks. It trades at one price-to-sales (P/S) ratio of 3.4. That’s more than double the valuation Amazon was selling for in early 2023. But I think investors should still consider buying shares.
The current P/S multiple is slightly more expensive than the stock’s 10-year average. At that price, investors would get exposure to a company that is a leader in multiple industries and that a major player in the AI wars with AWS. Amazon shares may provide a boost to your portfolio in the coming years.
Should You Invest $1,000 in Amazon Now?
Before you buy stock in Amazon, consider this:
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Neil Patel and his clients have no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon and Meta Platforms. The Motley Fool has a disclosure policy.
1 Stock That Turned $1,000 Into Nearly $2 Million was originally published by The Motley Fool
