What is Amazon?
Amazon (AMZN) is an American multinational technology company founded by Jeff Bezos in 1994. Bezos at the time decided to change his life and made up his mind to move to Seattle to start a bookselling business, which he did, sometimes sleeping in his car with all he owned in the world. In the company’s early years, Bezos and the pioneer staff used to do all the packing by hand, virtually on their knees. It may be difficult to reconcile the company’s humble beginnings with its present status which has made Bezos the world’s richest man.
Over the years, Amazon has transformed itself from a bookselling online store to an online marketplace where any item that could be put to use in everyday life can be purchased. Electronics, video games, books, gadgets, furniture, food, software are just some of the products that are found on the website. The company has also delved into logistics and is developing proprietary technology for artificial intelligence. Moreover, Amazon has a publishing and online advertising division, which is where the sale of e-books via its Kindle device is done as part of its very successful Amazon Web Service (AWS) offering. The business has major partnership arrangements with wholesalers and retailers from across the world. It has also been able to secure contracts with agencies of government, including the CIA.
Overview of Amazon’s history
Amazon’s meteoric rise, both as a company and on the stock market, did not kick in until the start of the last decade. The business went public on the Nasdaq stock exchange in March 1997, with a starting price of $18 per share. Three stock splits were carried out in the first two years of listing. Amazon stock performance for the period was not remarkable, and so were the company’s fortunes for the first few years after the firm went public.
The early years were very challenging for the company. Amazon ran into significant headwinds created by the dot-com bubble of 1999/2000. However, it was able to survive this storm because it had a product, a revenue model and clients who were already patronising its products, unlike many of the dot-com companies of that age.
Up until 2001, Amazon did not make any profit. However, this was not because the company was not bringing in cash. Demand for its products and services was rising, and rather than turn to debt financing, the company decided to reinvest its revenues to finance its expansion processes. 2002 saw the company hit profitability for the first time and it has not looked back since.
So, what has Amazon stock price history on the Nasdaq been like?
Amazon share price history: a stellar rise of the tech giant
The Amazon stock price history chart that would best place the price ascension of AMZN into proper perspective would be the monthly chart. AMZN stock price history indicates that by the start of 2004, heading into the conclusion of the seventh year of its listing on Nasdaq, Amazon was trading at around $52 per share; nearly three times its listing price.
Things began to pick up for Amazon after the global financial crisis of 2008. At this time, the quantitative easing (QE) programs of the US government provided cheap capital to investors to encourage them to re-enter the battered US stock markets at the time. As the QE programs kicked in and started to drive a monumental recovery in the US markets, Amazon found itself appropriately positioned to ride the rising waves of the market. By this time, it had launched its famous Amazon Web Services (AWS) program, products such as the Kindle device were achieving sky-high popularity, and the company had radically expanded its logistics and cloud-computing product suite.
The Amazon share price history graph for the last 22 years is captured below.
The long-term Amazon stock history graph shows that the company's shares started to experience a meteoric rise in 2015. The Amazon share price history graph shows that the growth the stock experienced from 2015 to 2019 far outpaced the business’ stock growth in its first 18 years of listing on the Nasdaq exchange. The rapid growth period has come largely from Amazon’s Web Services products, and also coincide with when Amazon’s business structure began to centre around the following:
- Investment in new and emergent technology such as artificial intelligence (AI) and facial recognition;
- Disruptive business models such as pioneering the use of drones for achieving same-day package deliveries;
- Diversification of its product/service base. Amazon pioneered cloud computing in 2006, but it took some years for the product’s earning potential to kick in and this is now one of the company’s biggest revenue earners;
- Expansion of its customer base to include large businesses and government (CIA chose Amazon over IBM for its $600m cloud computing project).
These developments have led to a surge in revenue and profits for the company. Naturally, a firm that is doing so well with its expansions while growing its flagship marketplace business would become the toast of investors, leading to market-driven demand and surge in the share price. Perhaps the singular event of 2015 that sparked such a huge interest by investors was the disclosure for the first time of its revenues and profits from its Amazon Web Services (AWS) program. Revenues stood at $4.6 billion in 2014 and have been growing steadily. As of Q4 2019, AWS had raked in $25.66 billion in sales.
Therefore, the Amazon stock price history, especially that of its latter years, is a direct reflection of revenue that the company has been able to bring in.
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What factors drive the price of Amazon stock today?
The growth of the cloud infrastructure market has boosted the stocks of companies involved in this sphere: Amazon, Microsoft (MSFT), Alphabet’s Google (GOOGL) and Alibaba (BABA) made the most of this windfall. Amazon saw its cloud infrastructure revenues grow from 36 per cent from $25.4 billion to $34.6 billion. It also retained more than a third of the total market share of that sector.
Amazon shares history and price action of its latter years have demonstrated what factors tend to drive price movements of Amazon stock. Some of these factors are:
- Quarterly earnings reports (as is the case with all listed companies);
- Market share statistics, including its ability to retain or win over clients from its competitors in the cloud computing and retail sectors;
- Amazon stocks may also be vulnerable to systemic factors that affect the entire sector or even the entire exchange it trades on. A good example of this is the current global stock market selloff which is affecting US markets and individual stocks as well as a result of the coronavirus outbreak.
These factors may continue to be the key drivers of the Amazon share price for the rest of 2020.