Prediction: Amazon Stock Will Be Worth More Than Apple In 10 Years
Most people think of Amazon (NASDAQ:AMZN) as an e-commerce business, and for good reason. It has become the online marketplace of choice for millions of consumers around the world. But the company is also participating in two other expanding industries, both of which could fuel significant growth over the next decade.
In this Backstage pass video, recorded on January 4, Motley Fool contributor Trevor Jennewine explains why Amazon might outperform Apple (NASDAQ:AAPL) as the most valuable company in the world in 10 years.
Trevor Jennewin: The company competes in three high-growth sectors. You have e-commerce, cloud computing, and digital advertising. The market cap is $1.7 trillion right now. I think it could double in the next five years, I certainly think it could overtake Apple in a decade.
Just to put its competitive advantage into perspective, in the US e-commerce market, Amazon has a 41% market share. The next closest competitor is walmart with 6.6% market share. This is therefore several times higher than the next closest competitor.
In cloud computing, Amazon holds 32% of the global market. The next closest competitor is Microsoft with 21%. On the cloud computing side of its AWS business, the operating margin on AWS was around 29% in the last quarter, compared to around 4% in its North American e-commerce business and 1% in its commerce business. international electronics. It is the company’s cash flow growth engine.
Digital advertising is turning into another. They currently hold 11.6% market share in the digital advertising market. This is around 8% in 2019 and is expected to reach around 15% by 2023. Meanwhile, [Alphabet‘s] Google and [Meta Platforms‘] Facebook are still the top two dogs in this market. But Google’s market share is expected to fall by around 2% by 2023, down to around 26%. And Facebook’s market share should remain stable at around 24%.
If you’re an Amazon shareholder, one thing you might be concerned about is that they’ve generated negative free cash flow over the past 12 months. Cash from operations actually fell about 1.2%. The company is investing heavily in building its distribution network. Even now, during the last quarter, CEO Andy Jassy mentioned that Amazon had almost doubled the size of its distribution network since the start of the pandemic. I think that allows them to provide this great delivery experience to customers, and I think that strengthens their competitive advantage.
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