Just over a month ago, Apple Inc. became the first company in the United States to hit the $1 trillion mark. Now, Amazon, one of the largest e-commerce companies in the world has hit that mark at the stock’s price surpassed $2050.27. However, the stock did not manage to stay at that point by market close Tuesday, as the stock closed at a value of $2039.51. With the approximate market value of both companies greater than $1 trillion a piece, they now account for more than 8% of the entire value of the S&P 500.
Perhaps the most amazing eat regarding Amazon’s trillion-dollar valuation is in regard to their e-commerce business. Statistically speaking, more than 90% of American retail spending takes place in traditional brick and mortar stores, like Walmart and Target. With only 10% of the retail spending “within the realm” of their e-commerce business, they have still managed to achieve the second largest market value in the United States. In addition, their valuation means they have a market value than those of the 1 largest big-box retailers in the United States, combined.
Amazon’s valuation has got to the $1 trillion mark at an impressive pace. At the beginning of 2018, the company was worth around $580 billion, just more than halfway to the mark. However, after the company reported an incredibly large net income of $2.5 billion, the stock price soared. In large part, the second quarter results served as the main catalyst for hitting $1 trillion.
Along the way, Amazon has received many skeptics and critiques of both their valuation and strategy. Many investors and other companies have criticized the company for its high stock price and overall valuation. They truly thought that Amazon and its stock were overpriced. Those critiques, like David Martins, the owner of an independent research firm, have been turned. In large part, his views changed as Amazon has continued to expand into numerous industries and has been able to dominate in many of those endeavors. In the words of Martins, “I think Amazon is the best combination in the world of the scale of a large company and that entrepreneurial DNA with the spirit of a startup.”
Some critiques do remain. Mostly, critiques who see the potential for anti-trust laws in the future. Historically, antitrust regulators focus on companies which have such a strong pull in an industry or segment, that they are able to influence prices. To this point, Amazon has not raised its price or unfairly, but rather reduced prices in many cases. Even others think that Amazon is becoming too big of a company, thus presenting the next big company from entering the market and being successful. While it is certainly not unfair to be a large successful company across many horizons, experts like Hal Singer, a senior fellow at George Washington University’ Regulatory Studies Center, says that the reduced innovations that come from as a result of fewer companies and fewer innovators existing may not be worth the risk.
Critiques or not, Amazon has achieved remarkable success and a tremendous market value. The possibility for future growth is an opportunity on the horizon for investors and Amazon alike.
