With so much uncertainty surrounding many companies due to coronavirus, it's natural for investors to wonder how large companies will weather the current crisis and what they'll look like a few years from now.
Of course, it's impossible to predict precisely what will happen with Amazon (NASDAQ:AMZN) in the coming years. Still, the company's current lineup of strong businesses provides a good roadmap of what we can expect from Amazon in the near future. Let's take a closer look.
Amazon will continue leading the e-commerce market in the U.S.
Amazon is the leading e-commerce company in the U.S. with an estimated 39% of all online purchases happening on the company's platform. To give you some perspective on just how big Amazon's lead is, the company's largest competitor, Walmart, has just 5% of the market. Earning that top spot is no small feat, and the position creates a massive moat around Amazon's business that other companies will find nearly impossible to overcome.
The current coronavirus crisis only serves to solidify the need for online shopping and home delivery of everything from soap to clothes. And don't expect the sudden increase in online ordering for necessities to drop off once COVID-19 becomes a thing of the past. Many online shopping holdouts are likely now understanding the benefits and ease of e-commerce and might continue the practice even when social distancing is no longer required.
Investors can expect the company to learn a lot about consumer demand and even more about shipping logistics from the current crisis that will allow it to make its service even better in the coming years.
The company will still dominate the cloud computing market
E-commerce is Amazon's largest business by revenue, but the company's most lucrative business is its cloud computing company, Amazon Web Services (AWS). In the most recent quarter, Amazon's e-commerce sales in the U.S. totaled $53.7 billion, with $1.9 billion in operating income. Meanwhile, AWS brought in $9.9 billion in revenue, with $2.6 billion in operating income.
AWS leads the pack when it comes to cloud computing market share, taking 33% of the cloud infrastructure market. For comparison's sake, Microsoft's Azure is Amazon's largest competitor, and it holds 18% of the market.
With Amazon's current lead in cloud computing and the segment's revenue growing 34% in the most recent quarter, there's no reason the company can't continue to dominate in this business five years from now.
Don't count out the company's other bets
Finally, one of the great things about Amazon is the fact that its CEO, Jeff Bezos, is laser-focused on expanding the company well beyond a traditional e-commerce business. That vision has already led to Amazon's fantastic growth, and it'll likely continue in the coming years as well.
For example, it purchased PillPack in 2018, which puts the company squarely in the middle of the $335 billion pharmacy market, and Amazon's most recent move into the healthcare market comes from its purchase of Transcribe Medical, a company that automatically transcribes conversations between doctors and their patients.
The point is, Bezos is always looking for new ways to grow Amazon, and five years from now, you can bet the company will have its hands in even more businesses as it pursues new ways to be an essential part of its customers' lives.
Keep this in mind in the short term
While Amazon's five-year potential is huge, there will likely be some volatility in the short term due to the coronavirus and the impact the virus will have on the U.S. economy.
This means there will probably be some big swings with Amazon's (and nearly every other publicly traded company's) share price. But over the long term, Amazon's businesses are in fantastic shape to continue growing, and the company's focus on expanding into new markets should help Amazon remain a fantastic long-term investment years from now.