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— This is the script of CNBC's news report for China's CCTV on September 5, 2018, Wednesday.
"One trillion dollars" was once a distant goal for many America companies. Looking back to history, before Apple became the 1st one in trillion dollar club on 2 Aug, 242 years had passed. And only in 33 days, Amazon becomes the 2nd one. However, there are many differences in the nature of those 2 companies. Apple makes profits by popular electronics while Amazon introduces so-called "Game-Changer" concept to investors. The 2nd difference is the sprint phrase of this marathon that their market value reaching trillion dollars, that is $200 billion: Apple took 15 months to barely reach that, but Amazon only spent 3 months to make this milestone.
US stock market stumbles this year though, Amazon's share price soars, with 74.4% gain, contributing $440 billion to its market value, which outperforms the total market value of component stocks in the S&P 500, excluding the 5 most valuable companies.
The 3rd difference is the time they spent on reaching trillion dollars market value, Amazon spent 21 years, shorter than that Apple took. Let's take a brief look at some key points in amazon's history.
In 1994, Bezos, a former hedge fund manager, founded Amazon whose started positioning is online bookstores, then Amazon went on IPO just 3 years after it founded. In the IPO process in 1997, Amazon raised $54 million while its estimated market value was only $0.438 billion. In 2000, Amazon made an important decision, that is allowing 3rd-party sellers enter Amazon, and the result turned out that Amazon successfully built E-commerce market share relied on the 3-ed party sellers. In 2002, Amazon introduced cloud service AWS, providing computing service to enterprises. But at that time, it was hard know now AWS has been the biggest driver of amazon's revenue growth; AWS's revenue is estimated to be $22 billion in 2018, outperforming retail business. In 2005, Prime member service launched, and offered a series of targeted member discount service, for example, free 2 days delivery. The number of Prime member has beyond 0.1 billion, and the subscription fee jumped to $12.99 per month or $99 per year this year. In 2007, Amazon introduced E-book Kindle that gained almost 70% shares in global E-book market, being a flagship of E-book. Additionally, 8 years ago, Amazon announced its move into the movie production business, Amazon Studio, to become a content provider and to realize the integration of online play and offline cinema. Last year, an important strategy was acquiring Whole Foods Chain, developing logistic business in food and fresh. Its fast global expansion made $177.9 billion annual turnover last year.
The recent trend is Amazon is less reliant on E-commerce revenue amid its strong expansion in new business. Pressure is mounting on every US industry, because Amazon is trying to break original industry pattern. And Amazon's founder Bezos became the world's richest person amid booming stock performance. But we also have to know that not all things went smoothly in the past 21 years, for example, Amazon tried to enter cell phone market and introduced phone called "Fire", but this product was discontinued in 2015, just a year after it went on sale.
At the same time, at the start of 2002, when tech bubbles burst, Amazon almost went into bankruptcy. At that time, thanks to a transferable bonds transaction that raised $ 0.672 billion, Amazon can survive. But in a decade before that, because of a long-running weakness in stock price, the market voiced skepticism on whether Jeff Bezos is competent to be an executive. Till 2009, Amazon's share price got back to a summit over $100 it reached before the depression period of tech-stock. Currently, some people still throw Amazon in doubt; President Trump thinks Amazon disturbs US postal service, and there are tax injustices, some parliament senators also criticize its working conditions and wages.
Meanwhile, Amazon can keep its trillion-dollar market cap for how long time, and whether there will be a third trillion-dollar company in the U.S. stock market, those have fueled the bearish sentiment in the market. Now, if the market value matches the tech companies' real value is a concern for many.
Portfolio Manager, Washington Crossing Advisors
It is potential that growth stocks, particularly large cap growth have been hitting a peak and valuations now dont make sense. We are somewhat more concerned about that type of bubble thats been forming overall, so we'll be more cautious at this inflection point.
So Amazon has great potential and opportunity, but also faces unknowns and challenges.