Amazon becomes second-largest company in the world by market cap
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Amazon becomes second-largest company in the world by market cap

If you’ve found yourself impressed by the number of new markets Ecommerce titan Amazon seems to be working towards, you are not alone. Investors’ interest in the company’s growing moves in areas as disparate as groceries, health insurance and consumer devices, has propelled its market cap to new heights. As of this week, Amazon is now the world’s second most valuable company after Apple, knocking internet giant Alphabet into third place.

graph 2203 amazon

This is the first time Amazon, which has been touted by some analysts as a promising prospect for world’s first trillion-dollar company, has overtaken Alphabet in terms of value. And it’s a direct result of the former company’s appreciation in share price – Alphabet’s value remains safe, with a $762.6 billion market cap.

One reason Amazon is going up is that it’s diversifying into new markets while retaining dominance in its core market. Alphabet remains first and foremost an advertising company: it has numerous secondary businesses, but none of them make a meaningful contribution to its revenue beyond Google’s ad sales. Likewise, while Apple generates huge profit, analysts have long complained that its fortunes remain linked primarily to one product: the iPhone. Amazon, in contrast, is beginning to look like a major player in multiple spaces.

Amazon’s online retail business is world leading, and it grew out of online book selling (where it remains the market leader). It’s gone further by upending the industry, owning both ebooks and audiobooks. Today, it dominates in sales of everything from batteries to baby grows.

However, online retail is just the tip of Amazon’s iceberg. Through its Prime scheme, Amazon has become a powerhouse in the streaming video on demand (SVOD) space, as well as music downloads. Its acquisition of Whole Foods and experiences running Amazon Fresh and Amazon Go are translating into a legitimate bid for the grocery market and offline sales. Amazon Web Services is already big name in the lucrative cloud hosting market. And recent news demonstrates that healthcare and advertising are definitely on the cards.

Jeff Bezos’s approach to business is rightly lauded among investors. Can it push Amazon to become the world’s most valuable company?

Disclosure

Dominion holds Amazon in its Global Trends Ecommerce Fund.


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