Amazon.com, Inc. (NASDAQ:AMZN) has been a controversial stock for years. While most investors acknowledge that its business model is excellent and agree that its leadership is visionary, there is dramatic disagreement on what the company’s value should be. Despite trading at ridiculously high price to earnings and free cash flow yield multiples, the stock keeps surging upward as illustrated in this chart.
After recently passing the $300 per share threshold for the first time in its history, it is a good time to take a step back and revisit why Amazon.com, Inc. (NASDAQ:AMZN) continues to defy investors’ traditional focus on trailing valuation metrics.
Tremendous growth continues
As I’ve written at length in a series of ten blogs in the past year, Amazon.com, Inc. (NASDAQ:AMZN) is simultaneously disrupting a number of industries. Since the most recent of these blogs, Amazon.com, Inc. (NASDAQ:AMZN) has continued its heavy investment in a number of areas; here are just a few of the highlights:
- Amazon.com signed a content deal with, which provides Amazon Prime subscribers with access to an array of shows ranging from Dora the Explorer to the Jersey Shore.
- Amazon.com announced that it is moving forward with five customer-selected original television series.
- Amazon.com rolled out a section of its website devoted to the sale of 3D printing equipment and supplies.
- Amazon.com launched an online marketplace in India that allows users to list and sell products directly to customers.
- Amazon.com announced the upcoming launch of a dedicated fine art website.
- Amazon Publishing announced that it will begin publishing comics and graphic novels.
- AmazonFresh will expand from its trial in Seattle to Los Angeles and San Francisco this year.
These are just a handful of the headlines from the past quarter. The company also continues its rapid growth in a number of other ways. For example, Amazon Web Services, which reached $2 billion in revenue last year, has been projected to reach revenue of as high as $24 billion in the next decade; AWS’ strong product portfolio and growth rates made one analyst project that AWS would be worth $19 billion as a standalone company earlier this year.
On the consumer side, Amazon.com, Inc. (NASDAQ:AMZN) continues to attract customers thanks to its selection, prices, and the free shipping and online video streaming perks of its Amazon Prime service. The result: over 209 million active customers. Aside from customers coming back for repeat purchases, this tremendous base provides Amazon.com to grow revenue in areas that you may not expect; for example, Amazon.com, Inc. (NASDAQ:AMZN) is thought to be on track to exceed $800 million in advertising revenue during 2013.
Growth does not come without upfront costs
Amazon.com has spent over $4 billion in the past year on capital expenditures to support its rapid expansion of data centers and distribution centers around the world. While significant on its own, this $4 billion capital investment is only part of how Amazon.com is investing in future growth.