For the last decade, Amazon.com’s (AMZN) valuations scared value investors. In that time, the stock marched higher and higher. At a 182x P/E, Amazon is still a fundamentally strong company whose market share will keep growing.
Macy’s (M) struggles show how bricks and mortar retailers are no match for online stores. Retail stores need to pay rent and operating expenses regardless of sales. Amazon’s Prime service guarantees a fixed subscription revenue from its customer regardless of how many orders they make.
Amazon is growing its streaming video business. Netflix (NFLX) is the other big company demonstrating valuations do not matter as the stock soars higher. Netflix may book and the amortize its costs for acquiring content, but its customer growth is growing at a faster pace.
At CES 2017, Amazon.com’s Alexa proved the company is building a niche in home automation, personal assistance AI, and will grow its online shopping offering through suggestions Alexa will presumably provide. Amazon’s Alexa accomplishes what Apple’s Siri and Google Now does not: voice-entered personal assistance connected with home automation.
Home automation is still in its infancy, but as IoT grows, Amazon is making sure that it is still a relevant player in this market.
AMZN’s stock value is about its future growth and market share. Revenue and market share are growing and as long as that happens, $1000 a share is a possibility regardless of valuations.
