Amazon.com, Inc. (NASDAQ:AMZN) Rally Generates Billions for Shareholders

November 06, 2017, 10:19 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

After releasing its quarterly earnings report on October 26, Amazon.com, Inc. (NASDAQ:AMZN) stock price rallied higher to create billions for the company’s shareholders. The company added about $62.0 billion to its market capitalization on Friday, October 27, which is the third highest such increase in the history of the stock market.

Article Summary

Amazon recently announced its quarterly earnings exceeding analyst expectations

The company’s stock rallied to new highs adding billions to its market cap.

The company’s stock is expensively valued.

Here’s the trading report on AMZN.

One of the main beneficiaries of the rally in Amazon.com stock was Jeff Bezos, the company’s CEO and main shareholder, whose net worth is largely attached to the company’s stock. Mr. Bezos became the richest man in the world after his stake in the company increased significantly to culminate in a net worth of $93 billion, hence, dethroning Bill Gates as the richest man in the world.

Amazon is shaping up to be one of the most iconic companies of the 21^st century and there is no telling what the company’s future endeavors shall entail. The company recently bought Whole Foods Market, Inc. (NASDAQ:WFM) in order to expand into the food retail market, while at the same time seeking pharmaceutical licenses with the aim of entering the healthcare industry.

The company is one of the most disruptive companies in history and has revolutionized the retail industry while taking market share from many physical retailers such as Wal-Mart Stores Inc (NYSE:WMT) and Target Corporation (NYSE:TGT). The company is also a major player in the technology industry through its web services division and is constantly looking for new avenues to generate additional revenue streams by creating value for its customers.

Amazon is currently gearing up for the holiday season where retailers make most of their profits through discounting prices in order to attract customers. The company recently discounted prices for some of its products, which are sold by third-parties, but this could draw the ire of such sellers.

This move is targeted at competing with Wal-Mart, which also offers crazy discounts during the holiday shopping season. However, physical retailers are not making it easy for Amazon as evidenced by the creation of e-commerce models and Omni channel marketing to compete with Amazon’s online platform.

Amazon stock is priced expensively given that it is currently trading at a P/E ratio of 280, which has led to some analysts arguing that it is not a good value or growth stock. However, the company’s recent results indicate that it still has growth potential.

The question remains whether it is prudent to invest in Amazon at its current valuation.

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