Amazon was founded on the 5th of July 1994 by Jeff Bezos as an online bookstore, with start-up capital of $250,000 from his parents. Within a couple of months, the business was already generating revenues of $20,000 per week. In October 1995, Amazon announced itself to the public and in 1996, was reincorporated in Delaware. Less than 1 year later, Amazon held its IPO (initial public offering) on the 15th of May 1997, trading under the ticker AMZN on the NASDAQ exchange at a price of $18 per stock. Today, Amazon is headquartered in Seattle, Washington and is now the largest ecommerce and cloud computing company in the world, both in revenues and market capitalisation. This has made Amazon stocks one of the most sought after by investors worldwide. Recognised as a continually innovative company, Amazon investors can be confident that this will propel the company to maintain its competitive edge. When it comes to acquisitions, Amazon has traditionally been a conservative buyer with few acquisitions compared to its tech competitors. This has, however, been changing in recent years with Amazon completing at least 10 acquisition deals. To date, its most notable acquisitions have been Whole Foods ($13.7 billion); Ring ($1,8 billion), which is a smart doorbell maker; Kiva Systems ($775 million), a robotic fulfilment system manufacturer; Zappos ($1.2 billion), online shoe and clothing retailer; and PillPack ($1 billion), a full-service pharmacy that packs and does door to door delivery.
When Amazon went public, they started trading at $18.00 per stock. Since then, the company has had 3 stock splits: 2-for-1 on 2nd June 1998; 3-for-1 on 5th January 1999; and finally, 2-for-1 on 1st September 1999. This puts the split-adjusted initial public offering of the Amazon stock price at $1.50 per stock. Amazon has witnessed tremendous growth over the last decade, rising from below $80 during the financial crisis in 2008, to ~$2,000 per stock 10 years later. To put that growth in perspective, a $1,000 investment in 2008 would now be worth over $23,000 at current stock market prices for the Amazon stocks. With regards to dividends, Amazon has never declared or paid cash dividends to their common stockholders. The tech giant also does not currently offer a Direct Stock Purchase Plan. The question that many people ask, is why would investors be interested in a non-dividend paying stock? The first incentive would be the increase in the value of the stock. Generally, non-dividend paying stocks usually increase in value at a faster rate than dividend paying ones. Another benefit would be the avoidance of double taxation. Investors are effectively shielded from paying tax until they decide to sell their stocks. Many companies that do not declare dividends usually reinvest a large chunk of their profits in R&D and launching new projects that may provide even higher value for investors in the long run. In Amazon’s case, the high stock price means that any meaningful dividend payout could be very costly for the company and would get in the way of other major concerns, such as the current pursuit of high quality acquisitions, investment in on-going operations and the paying off of debt. Amazon relies on its continuously growing stock value to keep its investors happier rather than paying dividends. And they could be right; as Amazon stocks are one of the most attractive for investors.
Corporate changes are capable of impacting stock prices significantly, and this was on display when Amazon changed its CEO, when the founding CEO, Jeff Bezos, handed over the baton to Andy Jassy. Investors gave the move a thumbs-up as the stock closed over 3.5% higher when the new leader took charge on the 5th of July 2021. A cloud computing guru, Andy Jassy has been with Amazon since 1997, and prior to his new role, he was heading the successful Amazon Web Services (AWS) division.
AWS is now the world’s leading cloud computing service provider, and in 2020, it was responsible for over 52% of Amazon’s operating income. AWS has millions of customers around the world, including over 120 fortune 500 companies. Andy Jassy has been leading the profitable arm from the very beginning, and investors are confident that his new role will help Amazon take the lead in future tech areas such as Robotics, Virtual Reality, the Internet of Things, Identity Management, and Quantum Computing.
As an Amazon insider, it is expected that Andy Jassy will maintain the long-term vision of the company. But his credentials go beyond his proven performance and track record. Andy Jassy has also been described as being more approachable than Bezos, and this might help in alleviating the threat of worker unionisation going forward.
On Wall Street, the general consensus is that Amazon is a high value stock with very good prospects for the future. Still, stock prices never move in a linear manner, even on the Amazon stock chart. Here are the factors to consider when trading stocks:
Amazon is included in the FAANG stocks, and even though many think of it as a tech stock because it operates online, it is primarily a consumer retail stock. Amazon has turned itself into a more than $1 trillion market cap business by excelling and dominating each niche it has participated in. Currently it is doing that in the cloud computing niche, which does make Amazon somewhat a tech play. Since its debut in 1997 at $1.50 Amazon’s stock has gained over 18,000%, making it one of the best long-term performers ever.
Aside from a huge dip in 2018 Amazon has been on an almost non-stop upward trajectory. That doesn’t mean just buying the stock randomly will always result in profits. Traders still need to wait for dips in the stock price for good entry points. Amazon stocks are also sensitive to earnings news each quarter, so trading around the earnings season can lead to good performance if the trader correctly identifies the direction the stock will take.
Because Amazon stocks have tended to trade steadily higher over the more than two decades since the company went public it is best to trade stocks in the long direction. Shorting Amazon introduces excessive and unnecessary risks. Instead traders are encouraged to take a swing trading approach that trades Amazon’s upward trendline, buying when prices touch the trendline and selling several days later to collect the move higher off that trendline. While it isn’t precisely a trend following approach, it does take advantage of Amazon’s tendency to trend higher.