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Why Amazon.com, Inc. Stock Is Up 35% This Year

By Jeremy Bowman - Updated Jul 17, 2017 at 6:49PM

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A pair of strong earnings reports and a blockbuster acquisition have guided the tech giant's stock higher this year.

What happened

Amazon.com (AMZN -2.19%) stock has surged 35% this year, according to data from S&P Global Market Intelligence, as the e-commerce giant has ridden a broader wave in tech stocks and continued to put up strong growth numbers. 

A worker at an Amazon fulfillment center

Image source: Amazon.com.

The stock has climbed steadily over the course of the year, topping $1,000 for the first time ever.

AMZN Chart

AMZN data by YCharts

So what

There was no singular news item driving Amazon shares higher, but the company continues to execute, growing sales and market share across a wide range of industries. Investors keep pushing the stock higher, as Amazon has built up a network of competitive advantages that is virtually unparalleled in the modern world.

In its fourth-quarter report out in February, the company posted sales growth of 22% to $43.7 million and earnings per share of $1.54, up from $1 the year before. Sales in the key cloud-computing division, Amazon Web Services, jumped 55% to $12.2 billion.  Shares fell modestly on the report, as revenue and guidance were below estimates, but the stock recovered those losses soon after.

A bullish tailwind in tech stocks has pushed the Nasdaq up more than 17%, with fellow tech giants AlphabetAppleFacebook, and Netflix, or the so-called FAANG group of stocks, all gaining more than 20%.

In April, Amazon posted strong first-quarter results, with revenue up 23% to $35.7 billion, and earnings per share increasing from $1.07 to $1.48. Both numbers beat analyst estimates, and the stock rose on the report.

The stock topped $1,000 for the first time in May, and Amazon then stunned the business world in June with its $13.7 billion acquisition of Whole Foods Market (WFM). That move, by far the company's biggest acquisition in its history, pushed the stock a nearly 3%, indicating a ringing endorsement from its investors.

Now what 

Amazon has long aspired to be the "Everything Store," and the Whole Foods acquisition brings the company significantly closer to that goal. For years, it's angled to break into groceries, but it has struggled to do so without a brick-and-mortar presence.

The stock's valuation remains stretched at a P/E ratio of 190, but the market has long given Amazon a pass on traditional valuation metrics as long as it continues to put up strong top-line growth. While the stock is still vulnerable to a sell-off, its competitive position continues to grow stronger, meaning it should continue to outperform the market.

John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Apple and Netflix. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Netflix, and Whole Foods Market. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$139.19 (-2.19%) $-3.11
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$169.62 (-2.89%) $-5.04
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$237.21 (-3.25%) $-7.96
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$117.98 (-1.82%) $-2.19
Apple Inc. Stock Quote
Apple Inc.
AAPL
$172.73 (-0.81%) $-1.42
Whole Foods Market, Inc. Stock Quote
Whole Foods Market, Inc.
WFM
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$118.76 (-1.74%) $-2.10

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

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