amazon (NASDAQ:AMZN) shares were trading at $0.09 when they went public in May 1997.
As I write this (April 27), its shares are worth $179.17. This represents an astronomical return of 198,833.33% in just over two and a half decades.
I should point out that I was born in September 1998, so it would have been impossible for me to invest in its shares during this period.
However, let's say my parents set aside £1,000 back then for me and decided to invest it in amazon when it went public (unfortunately, they didn't). You would have £1,988,333 today.
It's a long time though, so I'll also take inflation into account. Using the Bank of England inflation calculator, £1,000 in 1997 is equivalent to £1,898.42 in March this year.
As you can see, amazon stock has easily surpassed this.
The value of long-term investment
This is a great example of foolish investing, precisely because those who looked at the stock and were convinced of its long-term value remained steadfast in their convictions even during difficult periods for the company.
Yes, over the entire period, the stock made more than enough profits for investors, but within that period, it suffered some horrible results.
For example, when the dot-com bubble burst, amazon stock plummeted more than 90% between 1999 and 2002. In fact, from its original high of $5.25 in April 1999, it did not return to this level until October of 2009.
After this, it rose 2,914.14% further, so a £1,000 investment from this point would have been worth £29,141.40 today.
This shows the power of compounding for long-term investments.
Is it still capable of achieving these global performances?
The short answer is no.
To earn these life-changing returns, investors would have to turn to companies with a much smaller market capitalization. With its current market cap of $1.88 trillion, it's nearly impossible to see amazon stock rising at the same rate as it has in the past.
However, that doesn't mean it isn't capable of generating strong returns in the future.
Revenue continues to grow at consistently high levels. Between 2020 and 2023, its sales grew from $386 billion to $575 billion.
It also dominates high-growth industries such as e-commerce and cloud computing. In the US, it has a leading 38% market share in e-commerce, compared to second place. Walmart with 6%. amazon Web Services (AWS) is also outperforming competitors, such as Alphabet Google Cloud and microsoft Azure, with a market share of 31%.
However, there are some risks. Macroeconomic headwinds have proven to be quite detrimental to the company. For example, amazon's net income went from a profit of $33.4 billion in 2021 to a loss of $2.7 billion in 2022 due to inflationary pressures.
Furthermore, although it has a leading position in the cloud computing market, this is slowing, as its market share fell from 33% in 2022. This is probably amazon's most important segment for investors, as which is the highest margin of all their businesses. and generates the greatest profit. You will need to ensure that you remain competitive in this field to continue to thrive.
Overall, I think amazon stock will continue to do well in the coming years. There are some risks, but it also has its tentacles firmly in many high-growth fields, so I have high hopes that growth will remain strong.
