Here’s What Drove The 165% Jump In Amazon’s Stock Since 2017

by Trefis Team
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Amazon (NASDAQ:AMZN) saw its stock price rise by almost 165% over the last three years, from $825 in February 2017 to about $2155 in February 2020. This rise was primarily driven by a significant jump in Revenues as well as Net Income Margin. The company’s stock gains were partly offset by a lower price-to-earnings (P/E) multiple and an increase in shares outstanding.

We break down the movement in Amazon’s stock price into four factors: growth in revenue, growth in net income margin, a slight increase in share count, and a reduction in P/E multiple. View our interactive dashboard analysis, ‘What Factors Drove The 165% Growth In Amazon’s Stock In The Last 3 Years? for detailed trends in each of these factors over recent years.

A] Revenue Growth

  • Amazon has seen a $144-billion increase in revenues over the last four years, with net revenue growing from $136 billion in 2016 to $280.5 billion in 2019.
  • The growth primarily came from its North America segment, which makes up more than 60% of Amazon’s total revenue. Amazon’s International segment contributes just above 25% and Web services, around 14% of Total Revenue.

View the separate Trefis interactive dashboard on Amazon’s Revenues for more details on the company’s revenue segments and performance.

B] Net Income Rise

  • Net income increased from $2.4 billion in 2016 to $11.6 billion in 2019.
  • Net income margin reached 4.3% in 2018, primarily due to a better effective tax rate. The margin fell slightly to 4.1% in 2019.
  • Total expenses as a % of revenue also saw a steady decrease over the years from 98.3% in 2016 to 95.7% in 2018. There was a small rise in 2019 to 95.9%.
  • Notable changes can be seen in effective tax rate and steady reduction in COGS as % of revenue, along with lower Technology and Content expenses (in 2019), which has led to a rise in profitability.

C] EPS rise

  • EPS has increased steadily over the years from $4.90 in 2016 to $22.99 in 2019.
  • The sharp jump in EPS for 2018 was due to a sharp drop in the effective tax rate.
  • The number of shares outstanding has increased over the years.

D] Reduction of P/E Multiple

  • Amazon’s P/E multiple reduced from 169.4x in 2016 to 93.7x in 2019.
  • Over the same period, Walmart’s P/E multiple improved from 16.5x to 24.1x.

Though we have seen a 165% growth in the company’s stock price in the last three years, we believe that there is still some room for growth and maintain a price estimate of $2218 per share for Amazon’s stock. View our interactive dashboard on Amazon’s Valuation to understand what is driving a higher price estimate for Amazon’s stock.

Additionally, you can also check ‘What Factors Drove The 85% Growth In Alphabet’s Stock In The Last 3 Years?, to understand the stock price movement for peer Google over recent years.

 

See all Trefis Price Estimates and Download Trefis Data here

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