Amazon's stock valuation hits $1T
- On Tuesday, Amazon's market value for the first time passed the $1 trillion mark as the company's stock crept over $2,050 per share.
- Amazon was the second company to hit a market cap of $1 trillion. The e-tailer follows Apple, which passed the milestone about a month ago.
- Amazon's value, as determined by the stock market, far surpasses that of any other retailer. It is, for example, more than three times the market value of Walmart (about $281 billion at time of publication), though Walmart makes more than three times what Amazon does in retail sales and total profit.
Like an anniversary, the $1 trillion mark — while mind-boggling — is a symbolic milestone, a high water mark on Wall Street that Amazon passed and then receded from without any effort on the company's part at that particular moment. On the other hand, the dizzying value of the e-commerce giant's shares presents a very real advantage in the retail world where it competes.
Outside of the strictly retail space, Amazon is rushing into healthcare headfirst. The company made headlines earlier this year when it announced its employee health cost endeavor with Berkshire Hathaway and J.P. Morgan, then again when it announced that joint venture would be led by industry heavyweight Atul Gawande, and has spent the past few months building out the rest of its healthcare team with additions such as Iora Health physician Martin Levine and, more recently, Healthcare Transformation Lab's Maulik Majmudar.
While Amazon Business has been providing a marketplace for medical supplies, the retail giant is also moving into pharmaceutical distribution. The company has reportedly been in talks with digital prescription platform Xealth to launch a pilot that would have doctors prescribe products to patients before they're discharged, but no recent updates have been made on that front. Earlier this summer, the company acquired online pharmacy PillPack, which delivers individualized rolls of pre-sorted medicines to people who manage multiple daily medications.
It makes sense, then, that Amazon's market share creep is top of mind for healthcare executives. According to a recent Reaction Data survey of health industry leaders, 75% said Amazon holds the potential for "disruption." That's miles ahead of other rivals included in the survey: The runner up was Apple, at 14%.
Amazon's profitability as a business is a relatively recent phenomenon considering its lifespan. Last year, the company posted a little over $3 billion in profit, up 400% from 2015. But that's still just a fraction of Walmart's $10.5 billion in 2017 net income. Amazon's 2017 profits were just a touch higher than those generated by Target, which has a market cap below $50 billion — less than a 20th of Amazon's. Looking only at each company's domestic retail operations (taking out profit from Amazon's cloud services unit), Target's profits exceed those of Amazon. Costco is close behind.
Amazon's investors are nothing if not patient, and optimistic. And that's where the company's advantage lies. Shareholders shrugged past losses for years, allowing for Amazon to build up its technology and Prime loyalty program.
Today, Amazon controls about half the e-commerce market, which is still just around a 10th of retail overall. No competitor is even close in terms of sales or market share — not eBay, not Walmart, not anybody. Walmart, for all its e-commerce investments and much-watched acquisition and integration of Jet and its founder, Marc Lore, into the fold still looks like a bit player in e-commerce next to Amazon.
For Amazon, shareholders prize growth above all. If you go by fluctuations in stock price, Amazon doesn't typically face the same pressures from investors to maintain profitability that traditional retailers do — even the best-performing ones like Walmart, Costco and TJX Cos. That, arguably, gives Amazon far more leeway to go on investing in growth.
"The equity story on Amazon is interesting from my perspective," Moody's Lead Retail Analyst Charlie O'Shea told Retail Dive last year following a Moody's report on how far Amazon still was from dominating the retail world. "The shareholders are agnostic about profitability, and that gives Amazon a huge leg up competitively. If I'm running a retailer and my shareholders don't care if I make money or not, I can do a lot of things I couldn't do if my shareholders cared if I made money."
The disparity in stock prices has made many traditional retailers — Hudson's Bay Co., Macy's and Barnes & Noble, among others — vulnerable to agitation from activist shareholders, who often call for asset sales and new leadership, things that can affect long-run performance. Others, like Staples and Nordstrom, have sold themselves to private equity companies in leveraged buyouts or have explored going private.
Other retailers, including department stores such as Macy's and Kohl's, as well as Walmart and Target, have made deep investments into their digital and omnichannel capabilities to keep up with Amazon, often to the benefit of their customers.
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