Please ensure Javascript is enabled for purposes of website accessibility

3 Charts That Show Why Amazon is Amazing

By Billy Duberstein – Apr 21, 2017 at 4:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Everything Store is unique in many ways. Here are just a few.

Longtime Fool readers are no doubt familiar with Amazon (AMZN -4.77%). The company revolutionized the book distribution business, then most of retail, then logistics, then corporate infrastructure with its cloud business; it is currently setting its sights on India, TV and film, drones, artificial intelligence, and just about everything else under the sun.

Since the company is in so many industries and has a high-profile CEO who now owns a newspaper and a rocket business, it can be easy to get caught up in the daily headlines. Still, with the company at all-time highs, current and prospective investors may want to step back and appreciate the big picture. Here are a few charts that show why Amazon is amazing.

Stacks of coins arranged in an upwards-sloping graph

Image source: Getty Images.

"Your margin is my opportunity"

The following chart looks unlike any other company I've come across, except for Netflix. That should terrify any retailer, especially those who have traditionally, you know, delivered profits, buybacks, and dividends to investors. Amazon CEO Jeff Bezos once said, "Your margin is my opportunity," and he wasn't kidding:

AMZN Revenue (Annual) Chart

AMZN Revenue (Annual) data by YCharts.

As you can see, Amazon has never indulged shareholders with GAAP profits. Therefore, it never has to take them away. This freedom from margins means that Amazon can go into just about any business it wants and disrupt it from below. Given that the company is branching out into basically anything related to retail or technology, it's a wide-open space Amazon can explore, equipped with the fastest horse.

It's killing the mall (or, them all)

The next chart shows Amazon taking sales from mall-based and other power-center retailers (Wal-Mart is left off since its $450 billion sales would skew the chart). As you can see, competitors' lines are relatively flat:

AMZN Revenue (Annual) Chart

AMZN Revenue (Annual) data by YCharts.

Meanwhile, Amazon seems to be soaking up the extra sales, as the undisputed leader in e-commerce. While other stores are also investing in omnichannel and boosting their own online strategies, they're all playing catch-up.

Now Amazon is contemplating opening brick-and-mortar stores, taking on legacy retailers on their home turf: the in-store experience. Given Amazon's rabid focus on customer satisfaction, you can bet there will be something interesting about the Amazon bookstore coming to a town near you.

It's dominating the cloud despite competition

Amazon now has a cash cow, and it's scary: AWS (Amazon Web Services) is a small business relative to the retail segment, but it is growing like wildfire and earns 26% operating margins. In the most recent quarter, AWS grew a whopping 47% and now sports a $14 billion run rate:

chart showing Amazon dominating cloud market share maintaining 40% market share

Data: Synergy Research. Chart by Author.

As the chart above shows, AWS is the dominant first-mover in the industry. And while the secret is out that cloud computing is the future, competitors have not made a dent. The industry seems to be coalescing around AWS and services from Microsoft (MSFT -5.08%), Alphabet (GOOG -2.61%) (GOOGL -2.70%), and IBM (IBM -2.79%).

While those companies are growing market share, it has not come at the expense of AWS, but rather, from smaller upstarts. This is because, as the Wall Street Journal reported last weekend, building a cloud infrastructure costs huge amounts of money, and only the top dogs can compete. Amazon, Microsoft, and Alphabet spent a whopping $31.5 billion in capital expenditures in 2016. That's impossible to compete with if you're not already one of the largest companies.

This is leading to what is known as an oligopoly with a strong secular tailwind -- a profitable combination indeed. According to Gartner, the IaaS (infrastructure as a service) industry is set to grow 37% this year, and will continue torrid growth for the foreseeable future. If AWS can just maintain its share, Amazon looks like it will have even more cash to deploy into new markets and opportunities.

Bottom line: Amazon's unique record of reinvestment and experimentation is a formidable advantage, and it is not slowing down.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors; LinkedIn is owned by Microsoft. Billy Duberstein owns shares of GOOG, Amazon, IBM, and Microsoft. The Motley Fool owns shares of and recommends GOOG, GOOGL, Amazon, Gartner, and Netflix. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned, Inc. Stock Quote, Inc.
$114.56 (-4.77%) $-5.74
International Business Machines Corporation Stock Quote
International Business Machines Corporation
$118.82 (-2.79%) $-3.41
Microsoft Corporation Stock Quote
Microsoft Corporation
$234.24 (-5.08%) $-12.55
Alphabet Inc. Stock Quote
Alphabet Inc.
$98.68 (-2.70%) $-2.74
Walmart Stock Quote
$128.56 (-2.37%) $-3.12
Target Corporation Stock Quote
Target Corporation
$152.34 (-2.19%) $-3.41
Netflix, Inc. Stock Quote
Netflix, Inc.
$224.75 (-6.36%) $-15.27
Macy's Stock Quote
$17.44 (-0.51%) $0.09
Sears Holdings Stock Quote
Sears Holdings
Best Buy Stock Quote
Best Buy
$64.53 (-3.41%) $-2.28
Nordstrom, Inc. Stock Quote
Nordstrom, Inc.
$19.34 (0.52%) $0.10
Gartner, Inc. Stock Quote
Gartner, Inc.
$294.01 (-2.24%) $-6.75
Alphabet Inc. Stock Quote
Alphabet Inc.
$99.57 (-2.61%) $-2.67

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.