NEW YORK (BLOOMBERG) - Amazon.com's shares rose briefly just above US$1,000 for the first time on Tuesday (May 30), marking a new milestone for a company wooing investors by dominating online commerce and cloud computing.
Amazon hit an intraday high of US$1,001.20 in New York before ending the day little changed at US$996.70. The stock is up almost 40 per cent from a year ago and more than double the 15 per cent gain of the S&P 500 Index in the same period. Investors are thinking about how much further Amazon can grow as it tries to replicate its US success abroad.
The shares will likely push even higher since Amazon is growing so quickly in massive global industries that show no signs of slowing, as shopping habits change and businesses rethink how they deploy technology, said Mr John Blackledge, analyst at Cowen and Co, who recently upped his Amazon price target to US$1,125 a share.
"There's a long runway there," he said. "The markets Amazon is playing in with global retail and cloud computing are just massive. Things continue to go well and investors are looking for more upside."
The Seattle company's US$478 billion (S$660 billion) market value is double that of Walmart Stores even though the world's biggest retailer will have sales three times larger than Amazon's this year. Investors put more value in Amazon's Web traffic and delivery network than they do in Walmart's vast store presence because online spending will grow more than four times faster than overall retail spending this year as shoppers continue to shift from stores to websites, according to EMarketer.
The world's largest online retailer is dominating e-commerce with its US$99-a-year Amazon Prime subscription, which includes delivery discounts, music and video streaming and photo storage that keep shoppers engaged with the website. Amazon had 80 million Prime subscribers in the US as of March 31, an increase of 38 per cent from a year earlier, according to Consumer Intelligence Research Partners. Prime memberships help lock in loyalty, which is critical as competitors such as Walmart enhance their e-commerce offerings to slow Amazon's momentum.
Amazon has been tackling retail one category at a time, disrupting bookstores and electronics stores first and more recently pushing into apparel and groceries. Its rise has coincided with the decline of prominent retail chains such as Macy's and Sears Holdings, which have shuttered stores and laid off workers in response to declining sales. Shopping malls have resorted to hosting concerts and carnivals in empty parking lots to keep customers coming.
Another Amazon advantage is its profitable and fast-growing cloud-computing division Amazon Web Services, which maintains a global network of data centres and rents out storage space and computing functions to clients in a variety of industries, including Netflix and Airbnb, as well as Capital One Financial Corp and the federal government.
Amazon's rise has made its founding chief executive officer Jeff Bezos the world's second wealthiest person, behind only Microsoft co-founder Bill Gates, according to the Bloomberg Billionaires Index. "Amazon is worth far more than US$1,000 a share," said Mr Mark Cuban, owner of the Dallas Mavericks and an Amazon investor. "Consumers always want things at lower prices delivered faster. Amazon uses data better than anyone to achieve those goals for everything it sells. They have a chance to be the most dominant company in the world."