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Amazon’s 20 years as ‘pre-eminent disrupter of retail’

Companies hoping to go public are often accused of over-promising would-be investors — especially those that listed in and around the dotcom bubble — but the pledge of one that listed 20 years ago on Monday seems almost positively euphemistic.

Amazon.com intends to use technology to deliver an outstanding service offering and to achieve the significant economies inherent in the online store model,” the company said in its IPO paperwork.

“It was novel at the time, now it is accepted wisdom,” said Nicholas Colas, chief market strategist at Convergex. “They ended up being the pre-eminent disrupter of retail.”

Amazon shares, listed at $18 at the time, have produced a compound annual return of nearly 40 per cent since the initial public offering. That means, for example, that $100 invested in Amazon stock at the IPO would be nearly $64,000 today (the stock split three times, so one share at the IPO equals 12 shares now).

Up 63,990 per cent since its IPO, Amazon ranks as the best-performing US-listed IPO since 1995, according to Dealogic. For context, Netflix is fourth and Yahoo is seventh and the total return on the S&P 500 in the same period is about 300 per cent.

It was not always smooth sailing, though. Its shares sold off after the initial euphoria around the listing. Then, during the dotcom bust, adjusted for the stock splits, Amazon fell from a high of $113 in December of 1999 to a low of $5.51 in October of 2001.

Despite the meteoric rise and a fresh high on Monday, according to Bloomberg data, the stock has zero “sell” ratings, 8 “hold” ratings and 40 “buy” ratings.

Goldman Sachs, alongside Susquehanna Financial and Wedbush have given the stock a $1,250 price target — representing a 30.5 per cent premium to its closing price on Monday.

As online retailing has taken hold, Amazon has expanded and unseated traditional retailers. In 1996, Amazon had $15.8m of net sales. For 2016, that amount was $136bn.

In a sign of the changing times, Amazon’s market value now tops $450bn compared with about $230bn for Walmart, the largest brick and mortar retailer.

While Amazon began peddling books online, it has expanded its operations to boast a sizeable web services arm, Fresh, a service that has taken on traditional grocers and music and entertainment streaming services that aim to challenge Apple Music and Netflix. And Jeff Bezos’ ambitions have not ended there.

Amazon Studios, the company’s film and television programming arm, produced Manchester by the Sea — the first movie by a streaming service provider to land a best picture nomination.

Via FT