Amazon.com (AMZN -1.14%) has changed the way people shop for and read books. But perhaps the biggest thing that it has done -- for those lucky enough to have bought shares of the dot-com darling early in its tenure -- is change the financial lives of its longtime investors. Amazon's IPO turned 20 earlier this week, and it's been a pretty spectacular ride.
Amazon went public at $18 on May 15, 1997. This starting line, once adjusted for three stock splits (a pair of 2-for-1 transactions and a 3-for-1 deal that all took place before the dot-com bubble popped), becomes a mere $1.50. The stock closed at $957.97 on Monday's anniversary, which is a whopping 63,765% return through its first 20 years of trading.
Image source: Amazon.com.
Amazon grace
Investors won't get many chances at a 638-bagger, but there are plenty of opportunities to generate game-changing wealth if you get in early enough. David Gardner recommended Amazon to Motley Fool readers just four months after it went public. He bought into the disruptive online bookseller, making Amazon a part of the real-money portfolio that he managed online, showing other individual investors how easy it was to take on the market.
The stock was starting to percolate, soaring 41% in David's first two weeks of Amazon ownership. Speculators would've cashed out at that point, but why laugh all the way to the bank when you can be the bank? Amazon remained in the real-money portfolio -- at a split-adjusted cost basis of $3.20 -- until the online portfolio wrapped things up in 2003. However, a year earlier Amazon became one of the earliest picks of Motley Fool Stock Advisor. The stock continues to shine for that newsletter service, up 6,120% since that 2002 recommendation as of Tuesday's close.
Betting on Bezos
Amazon is naturally a lot more popular now than it was in 1997. The retail industry disruptor generated $35.7 billion in revenue during this year's first quarter. It rang up just $16 million in net revenue during the first three months of 1997. Amazon attracted an average of 80,000 daily visitors to its site 20 years ago, or more than 7 million total visits to Amazon.com during that year's first quarter -- and most of them probably left empty-handed. Jump 20 years later in this story's timeline, and this is the same company that just delivered more than a billion items through its Prime loyalty program this past holiday shopping season.
Jeff Bezos wasn't a household name 20 years ago, but now he's the guy who gives mall chains, grocery store operators, and even consumer electronics giants fits with Amazon's efficient suite of goods and services.
Shoppers love Amazon, obviously, but Bezos has many ways to turn retail enemies into friends. Vendors can sign up to have their goods stored at Amazon's growing fleet of warehouses, allowing their goods to be shipped to the tens of millions of Prime members with two-day deliveries at no additional cost to the buyers. Companies and even competitors turn to the Amazon Web Services platform for their cloud-hosting needs.
Amazon started as an online website selling leafy books and eventually DVDs and CDs, but now it offers cheaper digital distribution of media. Purist bibliophiles and book publishers may cringe at the sight of the Kindle, but it has leveled the playing field for authors.
The next 20 years will be spectacular
Amazon won't always get it right. An early auction platform failed to gain traction. It hurts to bring up the Fire Phone, and the recently introduced Echo Look is being ridiculed before it even hits the market. However, it is Amazon's willingness to fail that makes it so successful.
Amazon's stock also fails. It shed 95% of its value between late 1999 and when it bottomed out at the other end of the dot-com bubble explosion two years later. The stock has pulled back by at least 20% in 80% of its years as a public company.
If you're wondering why Amazon is a winner, it's because it's not afraid to be a loser -- in the short term, at least. Bears have knocked Amazon for investing in innovation over near-term profitability. Subsidizing hardware is a strategy that amounts to tech blasphemy for some. Giving Prime members access to a growing library of movies, TV shows, music, and other media at no additional cost is a strategy that may seem outrageous on the surface, but Amazon knows that it's all about keeping its customers close.
Consumers love Amazon, and after 20 years, investors probably love Amazon even more.
