Nearly half (42%) of people say they'll be doing most or all of their holiday shopping via Amazon this year. That means the massive online marketplace is likely going to clean up well this quarter — just like it did during its record-breaking holiday season last year.
It's not just during the holidays that Amazon does well, which is proven by its stock performance over the past decade.
If you invested in Amazon 10 years ago, that decision would have paid off majorly. A $1,000 investment in 2009 would be worth more than $13,300 as of Dec. 9, 2019, for a total return of around 1,232%, according to CNBC calculations. In the same time frame, by comparison, the S&P 500 earned a total return of around 255%.
Amazon has a current share price of around $1,750.
CNBC: Amazon's stock as of December 2019.
While Amazon's shares have done well over the years, any individual stock can over- or underperform, and past returns do not predict future results.
Amazon's early years
Amazon CEO Jeff Bezos launched the business as an online bookstore in July 1995. At the time, the Seattle-based company operated out of Bezos' garage with staff members working atop desks made out of doors purchased from Home Depot.
When Amazon launched, bookstore chains, such as Barnes & Noble and Waldenbooks, were prominent competitors. Selling books online was somewhat of a foreign concept to the public, but Amazon came out of the gate confident, promoting itself as "Earth's biggest bookstore."
It turned out Amazon was on to something. By 1997, consumers could browse more than 2.5 million titles, it had garnered 1 million customer accounts and revenue reached $148 million. In May of that year, the online marketplace went public at $18 per share with a company valuation of $300 million.
Just one year later, in 1998, Amazon's revenue ballooned to $610 million.
Over the next few years, Amazon's success allowed the company to begin selling more than just books. By 1998, Amazon sold CDs and DVDs and by the mid-2000s, it had started selling everything from electronics and toys to kitchen appliances, sporting goods, fashion products, accessories and video games.
Amazon's expansion into an online empire
Fast forward to 2019: Amazon is now the top e-commerce platform in the U.S. with more than 12 million products up for purchase, including books, media, groceries and shopping services. The online marketplace has expanded into a business that touches nearly every area of an Amazon user's life.
In 2005, Amazon launched its loyalty program: Amazon Prime. For a $79 annual fee, Prime members received free shipping on qualifying orders. Today, it costs $119 to become an Amazon Prime member, but the perks are greater. Not only do members get free one- and two-day shipping on select products, but they have access to Amazon-owned streaming services, shopping benefits and more.
Today, there are more than 100 million paying Prime subscribers worldwide.
In 2006, Amazon launched Amazon Web Services, its cloud-based web hosting system, and is now a leader in the cloud computing space. And in 2007, Amazon released its Kindle e-reader, the first in a long line of Amazon-branded consumer hardware products.
In 2015, to celebrate 20 years in business, Amazon held its first-ever Amazon Prime Day. The sale, which now lasts for two days, happens annually in July, offering exclusive markdowns to Prime members. In 2019, Prime Day shoppers bought a whopping 175 million-plus products.
In 2017, Amazon made headlines when it bought high-end grocery chain Whole Foods. Since then, Amazon's been hard at work merging the two brands together, both online and in stores. An additional benefit of the Whole Foods acquisition for Amazon is the vast amount of grocery shopping data the company now has access to, which will likely prove beneficial as it continues to build out its grocery business.
Amazon's challenges through the years
Despite its rapid rise to the top of the e-commerce space, Amazon has faced its fair share of challenges during its nearly 25 years in business.
In 2004, former toy store chain Toys R Us sued Amazon over claims that the company had allegedly violated its promise that the toy company would be the sole toy and game seller on Amazon.com. In 2006, Toys R Us won the case and the judge who oversaw the trial ordered the two companies discontinue their partnership and go their separate ways.
In July 2019, activists and unions in several U.S. states and some European countries used Amazon Prime Day as an opportunity to protest the company's practices by picketing and hosting rallies at various Amazon warehouse locations. Their concerns about the company included climate issues, warehouse conditions, lack of career advancement for workers and worries over facial recognition technology. In response, an Amazon spokesperson pointed to legislators, saying that unions and politicians could pass legislation to help workers and increase wages.
A month later, in August 2019, news broke that FedEx would terminate its ground delivery shipping contract with Amazon. Back in June, the package delivery company also ended its express shipping contract with Amazon, which covered air shipping. Shares of Amazon opened lower on the day FedEx announced its decision before recovering to close slightly higher. Amazon is working to overcome this operational challenge by increasing its own delivery network.
In late October 2019, it was announced that Microsoft beat out Amazon to secure a $10 billion deal with the Pentagon — a decision Amazon is currently fighting. As it stands now, Amazon will not participate in the highly sought-after Joint Enterprise Defense Infrastructure deal, otherwise known as "JEDI," in which it would have been aiding the Defense Department with its cloud computing infrastructure.
The ups and downs of Amazon's stock performance
Overall, Amazon's stock has done well through the years, but like most publicly traded companies, it's seen its ups and downs.
In September 2018, Amazon's shares hit a record intraday price of $2,050 as the e-commerce platform became the second public U.S. company after Apple to hit a $1 trillion market cap.
However, after reaching its $1 trillion peak, Amazon's stock began to "free fall." By December 2018, the shares had dropped 27% from the record hit in September of that year. Amazon's stock in the fourth quarter of 2018 had its worst results since the 2008 recession.
Wall Street had high hopes that Amazon's shares would make a comeback at the start of 2019, despite experiencing their worst quarter in a decade. Analysts were right: In the first quarter of 2019, the company beat profit expectations and matched revenue estimates. In the first three months of the year, the stock jumped 19%.
However, Amazon then fell short of Wall Street expectations in third quarter of 2019. The company said its earnings miss was largely due to the fact that it's currently in "investment mode" and has spent more than $800 million in each of the last two quarters on its free one-day shipping program for Prime members.
Still, the company stands behind its decision to invest in faster shipping. Amazon said its Prime members are already buying more as a result of its one-day shipping policy and it plans to put $1.5 billion more toward the initiative in the fourth quarter. Shares of Amazon are up 17% so far in 2019.
What's next for Amazon
In December 2019, Amazon went after President Donald Trump, saying that Trump had interfered with the Department of Defense choosing Microsoft as its partner in the JEDI deal. Amazon says the president allegedly put "improper pressure" on the DOD and inserted bias into its decision-making process. As a result, Amazon filed a complaint with the U.S. Court of Federal Claims, essentially asking for a do-over in the Pentagon's process and decision. Pentagon spokeswoman Elissa Smith denied any "external influences" on the JEDI award decision and declined to comment on the specific claims made in Amazon's lawsuit.
Amazon also announced in December that it's planning a new headquarters based in New York City. The news comes less than a year after the company shut down plans to construct its "second headquarters" (HQ2) in Queens, New York.
The first time around, Amazon faced heated opposition from activists and city council members surrounding the nearly $3 billion in incentives it was promised by city and state governments in exchange for bringing jobs to New York. But this time, Amazon's plan to move into Manhattan's swanky new Hudson Yards neighborhood won't involve any tax breaks in exchange for the 1,500 jobs the new location is expected to bring.
The new Manhattan location will open in 2021, according to an Amazon spokesperson.
If you are considering getting into investing, experts, including Warren Buffett, often advise starting with index funds, which hold all of the companies in an index, such as the S&P 500. Because index funds fluctuate with the market and aren't tied to the performance of a single business, they're less risky than individual stocks, making them a safer choice for beginners.
Here's a snapshot of how the markets look now.
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