It may be hard to imagine, but Amazon (NASDAQ: AMZN) started just 30 years ago as an online bookseller. Now the site sells a wide range of goods. The company has grown rapidly to include the popular Amazon Prime subscription service, electronic devices, and Amazon Web Services (AWS).
The stocks have also generated a lot of wealth for investors. Investors who bought and held on to stocks ten years ago would have seen an increase of almost 1,000%.
Beating the market
Amazon had its initial public offering (IPO) in 1997, when revenues for the year were about $148 million. That grew to nearly $575 billion last year.
But you didn’t have to buy the stock at the IPO price to make a lot of money. Over the past decade, Amazon’s stock has risen 945%. That’s outpaced the S&P 500‘s total return of 227%.
Even if you started with a relatively small $1,000 10 years ago, you would have about $10,500 today. If you had put the same amount into the S&P 500, you would have earned about $3,300.
Amazon shares will likely struggle to match those kinds of returns over the next 10 years, but that doesn’t mean they’re not worth buying.
Amazon shares have a price-to-earnings (P/E) ratio of 39, much higher than the S&P 500’s multiple of 27. That suggests the market has high expectations for Amazon’s growth.
Cloud computing business AWS remains the company’s top profit generator. The unit’s revenue grew 18.6% to $26.3 billion in the most recent quarter, while operating income rose to $9.3 billion from $5.4 billion. It also has the highest operating margin, at 36.5%, of the company’s three segments. The outlook looks good given enterprise demand for data, and the push into artificial intelligence could give the company a further boost.
However, with the relatively high valuation, you may want to use dollar-cost averaging to buy stocks over time. That way, you invest small amounts at regular intervals, and you don’t have to worry about timing the market.
Should You Invest $1,000 in Amazon Now?
Before you buy stock on Amazon, here are some things to consider:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
If You Invested $1,000 In Amazon Stock 10 Years Ago, Here’s What You’d Have Now was originally published by The Motley Fool
