Amazon Share Price Up 15% in 2016
October 31, 2016 by Douglas A. McIntyreDespite a large sell-off after earnings, Amazon.com Inc.’s (NASDAQ: AMZN) shares are up 15% year to date to $776.32. Inventors have not given up on the huge e-commerce holiday results altogether.
Oddly, Amazon’s shares are up by about the same amount as those of rival Wal-Mart.
The arguments in favor of a bright future for Amazon fall into three camps. The first is that, while the third quarter was rough, its relentless march to take more and more retail market share has not ended. It is willing to compress margins, as it traditionally has, to bring in business. Research continues to show that more and more people shop online.
The second argument is that Amazon has products that tether customers to it in ways other retailers cannot. The first among these is Amazon Prime, a combination of free shipping, video streaming and photo storage. And Amazon has consumer electronics devices that help glue customers to its business. First among these is Alexa, Amazon’s voice control system.
Finally, Amazon is the leader in white-hot cloud computing, a business that probably will be larger than its e-commerce one in a few years. In the September quarter, AWS had revenue of $3.2 billion, up from $2.1 billion the year before. Its operating income doubled to $1 billion.
Amazon could close the year much higher.
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