Anyone who follows the stock market or the exploits of Amazon won’t be surprised to learn that Amazon became the second American company to cross the $1 trillion (with a “t”) market value line.
Apple was the first, which also comes with little shock.or awe. But unlike Apple, Amazon only stayed at that high for a few hours. That day, Amazon stock, worth $2050.50 at the high point, fell back down to $2,039.51.
Comparing Apples and Amazons
There’s a fundamental difference between Apple and Amazon that allowed Apple to maintain a trillion dollar valuation when Amazon’s worth continues to rise and fall.
For investors, Apple is as solid an investment as Ford or 3M have been. It’s an established brand that sells lots of devices and services that generate profit.
Amazon, on the other hand, has spent most of its existence as a company making almost nothing due to continued reinvestment in itself. Only recently has it show much in the way of profit. Despite this, investors are lining up to throw money at Jeff Bezos and for one reason: a want to be part of the next big thing.
This is the only way to explain the massive difference in key indicators like the price-to-earnings ratio. The typical grocery, building supply or general retail stock has a PE ratio of 20 to 40, but Amazon’s PE is about 180. That means that for every dollar Amazon earns, it gets $180 tacked on to its value, more or less.
Amazon: Investors’ Favorite Reality Show
There’s no denying that Amazon has created some businesses that had never been envisioned before and that its diversification is a smart, if not costly, way to play the game.
Even so, there are only so many markets for Amazon to disrupt before it begins to slow and show its age. That’s assuming that the Internet giant remains safe from anti-trust lawsuits, of course.
Investors seem to be drawn to Amazon despite the lack of solid footing for that short-lived trillion dollar valuation. It’s as if everyone is looking for a way to be part of the Amazon story. Who wouldn’t want to help the retailer envision the future of delivery with specially designed drones or airborne fulfillment centers?
Yes. Airborne fulfillment centers, a patent Amazon applied for a few years ago.
“What delivery could possibly be important enough to merit such a crazy system?” The New York Times writer David Streitfeld asked in a recent article. “The patent has a suggestion: ‘Prepared hot food.’ We wanted flying cars, but we got flying burritos instead.”
Stay tuned to the hottest stock (and program) on Wall Street. Amazon is still made of dreamers and is apparently being funded by them, too.