Everyone knows if you had bought Amazon.com (AMZN 5.73%) stock when it was just an online bookseller and held on through till today, you’d be a millionaire several times over. A $10,000 investment back then would be worth around $11.7 million today.
But Amazon has progressed far beyond its bookseller roots and is now an integral part of the global economy. The company itself is worth nearly $1.2 trillion, or the size of a few small countries combined. It’s fair to ask whether the kind of growth needed to mint new millionaires from an investment in the e-commerce giant is still possible.
Amazon’s stock has lost 40% of its value from its all-time high and is down over 30% in 2022 alone as pressure on consumers from rampant inflation, higher costs, and a deteriorating economy takes a toll. Wall Street still looks fine, but Main Street, not so much.
With that as a backdrop, let’s see whether Amazon.com can still turn a $10,000 investment into $1 million.
A global phenomenon
Amazon is not alone in feeling the ill effects of a depressed consumer. A lot of online retailers, whether they’re selling general merchandise like Amazon and Etsy or cars like Carvana, are reeling from the blows consumers are taking.
Etsy stock is down 60% this year, and Carvana has lost 80% of its value (ouch!), but Chewy is off 53%, Wish.com parent ContentLogic is down 48%, and even upscale retailer Poshmark has seen 34% of its value ebb away.
And it’s not just in the U.S. Latin American retailer MercadoLibre is down 31%, while China’s Alibaba and JD.com are off 24% and 20%, respectively.
A retail relapse
Amazon’s recent earnings reported reflected just how much consumers are pulling back on their spending. While overall sales were up 7% year over year, first-quarter retail sales were down almost 2% to $56.5 billion, though that was a result of Amazon’s international business; U.S. retail sales were up 7.5% from 2021.
Even so, its operating expenses here at home skyrocketed 16% from last year, resulting in total operating losses of $2.8 billion. It ended up reporting a net loss of $3.8 billion, or $7.56 per share, compared to an $8.1 billion a year ago. A good portion of its loss, however, was due to its investment in electric truck maker Rivian, which has seen its value deteriorate more than 80% from its IPO last year.
Yet as Amazon notes, its consumer-facing business has grown 23% over the past two years, including a 39% gain in 2020 due to the pandemic, which necessitated the e-commerce giant doubling the size of its fulfillment network — and doing so in just 24 months.
It’s also expanding its Prime loyalty program beyond the confines of the Amazon.com website. No doubt partially in response to rival Shopify becoming more vertically integrated, Amazon will allow members to use their benefits at select retail sites with an eye toward expanding where they can shop in the future.
Look to the cloud
While Amazon’s e-commerce prowess garners the most attention, Amazon’s cloud computing operations have long been its profit center, and that continues to be true today.
Amazon Web Services (AWS) enjoyed a 37% surge in first-quarter revenue to $18.4 billion while operating profits rocketed even higher, jumping 57% to $6.5 billion. Because businesses will continue to migrate their operations and data to the cloud, AWS should continue to grow at the torrid rate it’s doing now, even as the number of competitors entering the market increases.
If I had a million dollars
So can Amazon.com still be a millionaire maker? Well, like the comedian Steve Martin once joked about being a millionaire and not paying taxes: first thing you do is get a million dollars. Which is another way to say I don’t believe Amazon can be a millionaire-maker anymore, at least not for most investors.
With a long enough investing horizon, young investors might be able to see their investment result in such a payout, but for older investors, there just might not be sufficient time to realize its potential.
But that doesn’t mean you shouldn’t invest in Amazon. In fact, I think the e-commerce giant is an excellent stock to buy, even if we are heading into a recession. That will eventually pass and a bull market will return. So with its price knocked down so far, there may not be a better time than now to pick up some shares. Just don’t expect them to turn into a million dollars.