Amazon Hits $1 Trillion

Written by Jennifer Clark
Posted September 5, 2018 at 11:49AM

Apple (NASDAQ: AAPL) was the first U.S. companies to hit the $1 trillion mark in August of this year. This week, another company joined Apple. On Tuesday, September 4th, Amazon (NASDAQ: AMZN) became the second U.S. company to hit the $1 trillion valuation.

Apple and Amazon hitting these valuations might not come as a surprise to you. But that's beside the point. The U.S. now has two tech companies with a $1 trillion valuation. According to Howard Silverblatt, a senior industry analyst for S&P, Amazon and Apple make up more than 8% of the entire value of the S&P 500.

It might not seem like a big deal that both of these companies reached a valuation of $1 trillion, but it kind of is. Both of these companies are fairly new on the market. Amazon is only a 24-year-old company. And over the years, it's grown into a huge and recognizable company. Not to mention, it's given its investors confidence in the future of the company.

Reaching a $1 trillion valuation will only give Amazon's investors even more confidence...

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Amazon's Strong Growth Gives Investors Confidence

Amazon has transformed the way we shop. It's essentially created one of the most successful e-commerce platforms in the world.

Amazon's share of U.S. retail e-commerce in 2018 has been 49.1%. This means that almost half of all shopping online takes place through Amazon's platform. By the end of 2017, the company's net sales were close to $178 billion. That's right: billion.

Investors are finally seeing the payoff for hanging on while Amazon spent the last few years building its business.

Amazon didn't create a lot of profits because it was putting its profits back into growing and perfecting its business. It was building its fulfillment center network, buying companies, and developing new technologies.

These are all things that you want to see from a company you're invested in. You want to see it growing its business and creating a future for the company.

But as an investor, this would also be a hard pill to swallow. Who knows if all this money being poured back into the business will pay off? Sometimes, it doesn't. But over the past year, Amazon has started reaping the rewards from all its hard work...

The Beginning of a Strong Year for Amazon

At the beginning of the year, Amazon's valuation was at $580 billion. And by the end of the second quarter, its net income increased to $2.5 billion. This was a huge increase from the prior year's second quarter, which the company reported as $197 million in net income.

Amazon Web Services (AWS), advertising, and revenue from its Amazon Prime memberships have been the driving factors in these huge increases in profits. AWS is the company's cloud business. Morgan Stanley values AWS at $375 billion. AWS is an influential part of the internet. It supports enterprises that range from the smallest startups to the CIA.

Amazon appears to be dominating in almost every industries it becomes a part of. And that gives Amazon its biggest appeal to investors. Not only that, but the consistency of revenue from Amazon Prime memberships is also an appealing factor.

This year, Amazon increased the amount that Prime members pay. And it had an increase in Prime memberships. Most Prime members feel that the once-a-year membership fee is worth it for all the perks they receive.

For its future, I only see Amazon's valuation increasing as it becomes even more influential to consumers and investors. This young company will keep growing...

Until next time,

Jennifer Clark
Pro Trader Today

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