In the e-commerce industry, one of the most well-known names is Amazon. With its fast and convenient delivery, reliable customer service and perk-filled Amazon Prime membership, it’s an e-commerce giant to be reckoned with despite its humble beginnings as an online bookstore.
Now with a huge competitive edge in its core services, constantly increasing market cap and revenue, positive investor sentiment, and visionary leaders like newly minted CEO Andy Jassy and founder Jeff Bezos, it’s easy to understand why this company is one of the most valuable in the world.
We’ll take a look at these three areas that contribute the most to Amazon’s value to figure out what it’s truly worth:
Economic moat and competitive advantages
Market cap, revenue and outlook
Leadership and executive team
Amazon’s Economic Moat and Competitive Advantages
An economic moat, a concept successful investor Warren Buffett and CEO Bill Gates use to invest, occurs when a company has a huge market advantage over its competitors. Buffett would typically invest in a company that has an economic moat, but Amazon has more than one.
A Look at Amazon’s Many Moats: Prime, Logistics and More
Although existing competitors can do bits and pieces of what Amazon does, Amazon’s core e-commerce business and logistics ability are economic moats. As such, there will be no competition that can match it in its entirety anytime soon.
The most obvious is Amazon’s Prime membership, which is all-encompassing in addressing customer needs. From free, fast shipping, to Prime Entertainment, to the Amazon Prime credit card with 5% rewards, the Prime membership is a large contributor to the value. It feeds into itself, keeping customers hooked on both shopping with Amazon and paying the monthly or annual subscription for the 5% credit card rewards.
To accomplish its shipping speeds, Amazon also maintains an economic moat in logistics. Its Fulfillment By Amazon business that connects to its Marketplace and Prime — its other moats — leverages its large-scale operation to solve inefficiency and cost.
This is not to mention Amazon’s competitiveness in many other areas. Among the more successful of these are Prime Video — a streaming service that competes with Netflix and comes bundled with a Prime membership — and cloud computing services like Amazon Web Services, which competes with Microsoft Azure.
Learn More: 23 Secret Ways To Save Money on Amazon
Revenue: $386 Billion
Amazon is one of the few trillion-dollar companies in the world, having joined the ranks of Apple, Microsoft and Alphabet –the parent company of Google– in 2020 after a great earnings report. Its revenue in 2020 was $386 billion, up 38% from 2019 and increasing by orders of tens of billions yearly.
The Positive Business Effects of COVID-19
Its revenue and worth have only gone up from there as its stock continued to rally, especially as Amazon stepped up to the plate amid the increased online buying during the COVID-19 pandemic. The company’s first-quarter net sales surged 44% year over year to $108.5 billion, surpassing analysts’ projections.
Although orders were slightly delayed for non-Prime customers for a couple of months in the initial phases of the nationwide lockdowns, Amazon was able to ramp up and fulfill orders just as efficiently as before in no time. Prime members barely even felt the difference.
Due to its great success in emerging as a reliable top player in the pandemic, along with many other companies that came out on top, Amazon’s stock climbed higher.
Amazon’s Market Cap: $1.63 Trillion
Amazon’s stock now sits at over $3,200 per share, bringing the market cap up to $1.63 trillion. This is a reliable indicator of its current worth and the investor sentiment around Amazon, even if it’s too high for its current revenue and sales. Despite Amazon’s success, stocks with overly high valuations in the stock market should still be bought with caution.
In perspective, much of the stock market has had a high P/E ratio in the past few years, so this shouldn’t be a worry as its future outlook — a large factor in both institutional and retail stock investment — is very promising. Revenues are rising by large percentages annually, there is continued outperformance and competitive advantage and leadership is sticking to the same principles that worked for decades while not failing to continually innovate.
Top 10 Shareholders
The Vanguard Group, Inc.
State Street Corporation
T. Rowe Price Associates, Inc.
Fidelity Management & Research, LLC
Geode Capital Management, LLC
Northern Trust Corp.
Norges Bank Investment Management
JP Morgan Chase & Co.
Amazon’s Net Worth: $314.9 Billion
Considering Amazon’s 2020 revenue of nearly $400 billion, its 44% sales growth in the first quarter of 2021, the current market cap of $1.63.trillion — though you also have to consider the high P/E ratio of 61.45– and its current cash reserve of $42 billion, Amazon’s net worth is likely not as high as its market cap. You also have to factor in any of its liabilities and debt. Therefore, a conservative estimate of Amazon’s net worth is $314.9 billion.
However, considering investor sentiment and the company’s outlook for the coming years, and assuming the trend of increasing sales continues, it could easily be worth upward of $1 trillion in the years to come.
GOBankingRates calculates net worth using company data that evaluates concrete, measurable figures such as assets and revenue. It is more conservative than other calculations, accounting only for full-year profits and revenue from the last three years, as well as any assets and debts incurred by the company.
As of 2021, AWS has 32% of the cloud provider service market share, while Microsoft Azure has 19% and Google Cloud has 7%.
Check Out: How Much Is Jeff Bezos Worth?
How the Leadership Team Will Continue Amazon’s Growth
Though Jeff Bezos is stepping down, someone just as competent and ambitious is filling his shoes. New CEO Andy Jassy was previously the head of the company’s most profitable sector, AWS.
Though AWS was initially an in-house solution to solve internal problems, a market opportunity was quickly sensed and decisively executed by these leaders. This gave Amazon an advantage of years over other major competitors like Alphabet and Microsoft, which released cloud services only in later years to get in on the booming cloud market share.
Having been at Amazon for 25 years — from the very beginning when it was a tiny startup with no office — Jassy is just as much a visionary as Bezos, who will stay on as an advisor and board member. Since Jassy is very similar to Bezos as a leader and spent time shadowing him, there is likely to be no change to Amazon’s work culture, execution or profits.
With both of them now at the helm of Amazon, there is nothing to expect but continued growth and expansion of both its current market and any new opportunities and innovations similar to AWS.
Methodology: The GOBankingRates Evaluation assesses a company’s net worth based on the company’s total assets, total liabilities, and revenue and net income from the last three years. Base value is established by subtracting total liabilities from total assets from the company’s last full fiscal year. Income value is established by taking the average of the revenue from the last three full fiscal years, plus 10 times the average of the net profits from the last three full fiscal years, and then calculating the average of those two figures. The final GOBankingRates Evaluation number is the sum of the base value and the income value.
Last updated: Jun. 2, 2021