The valuation has to do with this idea that Amazon will inevitably kill everything else including WalMart and end up the only way anybody can buy things or do business. It sure as hell hasn't built this valuation on the back of dividends to shareholders. You are taking a ride on a collective fantasy that there can exist a company that kills all other companies and somehow inherits their business without obliterating society as we know it.
Or, possibly, that there can be a cancer so big that it becomes the person and takes over doing everything that they do?
It's definitely a fantasy. Not Amazon's intentions: they're absolutely out to do this wherever possible, and it colors the attitude of Amazonians and dovetails with the political reality of the USA as it currently stands. The fantasy part is that it doesn't end in tears. Eventually Amazon must stop growing, if for no other reason than society will collapse and there will be no more customers for them to service, as there won't be jobs at Amazon to support 'em and government welfare will not be able to give the jobless people enough money to continue to buy things from Amazon.
That's already beginning to happen, but until then—there's a trillion dollar valuation, and the world of capital cries 'play on!'.
Or you could try and convince Amazonians NOT to kill everything else? But I don't think that'll get far: it's their culture and, as I said, that's the only reason for the valuation. People assume Amazon will continue to win.
Amazon on the other hand, between cloud and online retail, not only still has room to grow, and is building a moat around their business through the sheer scale of their infrastructure (logistics + datacenters).
Both are fairly pro-cyclical though (retail & luxury products). If anyone thinks the peak of the cycle is close...
For a company that started from computers, moved to media players, added music stores, added smartphones, added app stores, added tablets, add cloud services, added watches, and managed even the smallest of those categories (e.g. watches) to be the size of a Fortune 500 company (4-6 billion) and growing, it's rich calling it an "one trick pony".
Among other things, people buy Apple so that they won't be seen buying something more viable.
What other consumer electronics company is doing anything innovative?
It instead has everything to do with the fact that high end consumer electronics is only so big of a market, and is one that Apple has almost entirely tapped out.
Apple won the market, overwhelmingly so. But they can't win twice as hard, when they've won already as much as they can.
Several ways. They're actively looking into health sensor integration, with third party (and their own) devices, medical records, and with the Apple Watch as a continuous sensor. That's a huge market, even more lucrative than smartphones.
Second, they're better poised than anybody in this IoT thing, with their home automation platform.
Third, they are entering the living room, starting with the speakers, tv, etc. When they get serious with this (especially since they also combine it with their home automation) they'll have another nice market to tap.
Fourth, they've long since licensed Car Play, and they also have their own autonomous car project under continuous development. Whether in partnership with a car company or on their own, they can do quite well with e.g. their own electric city car.
Fifth, they also work heavily (and have made acquisitions etc) in AR / VR technology. If they put out some device, it wont be a prototype for enthusiasts like the one's we've seen, it will sell like crazy.
https://www.apple.com/newsroom/pdfs/Q2_FY18_Data_Summary.pdf
Even services is a derivative of iphone sales, no one is using them on non apple hardware.
Which is sort of a Catch 22 for them. If they invested in actually making the services good and cross-platform, people would probably pay to use them on non-Apple hardware. On the other hand they use services specifically to drive sales of Apple gear. But I don't actually no anyone who says, "I got an iPhone because iCloud is amazing!". Their internet services are basically table stakes.
There is precedent, though.
iTunes on Windows brought a lot of revenue in to the iTunes store, and convinced a number of people to try the iPhone.
I'm not sure it's a good time for Apple to expand its other offerings cross-platform, though. Its services are good, but perhaps not everything they should be. And supporting a small ecosystem of machines is a lot different than trying to support the eighty brazillion variations of Windows and Android machines.
Not true. In fact, you can do a whole lot with iTunes on Windows. Another fun fact - the decision to launch iTunes on Windows was a major turning point in Apple's growth.
How much of this is because iTunes is any good (not very much) and more because it uncoupled a good, affordable product (the iPod) from an expensive product that didn't justify its price tag to most people (the Mac)
It seems to me like colouring this with negative connotations is a bit obtuse; vertical integration is a strength, not a weakness
It also probably makes a larger profit on Macs than Amazon does in total.
Those two businesses are worth a likely $600b to $1t depending on how aggressive you want to be on the multiple. That's three to four years out, however that's how the market typically treats Amazon (forward expectations of growth, not the prior 12 months earnings). They're richly valued today, no question, and it's quite plausible they'll actually grow into their current valuation in time (the market cap today pulls at least five years of growth forward to the present imo; who knows if AWS and advertising will keep going as anticipated).
The retail business will end up being by far the least valuable part of the Amazon empire. Whenever the day comes that these pieces are split off, particularly AWS, the retail business won't end up being worth more than Walmart.
https://www.cnbc.com/2017/04/12/nearly-every-american-spent-...
At some point you will start to asymptote out. 1.7 Trillion is more than walmart+Target+3 of 4 big box retailers.
That seems very hard to believe. Trying to find more info on where those numbers came from, appears the NPD Group looked at 4 million receipts?
How do the segments that would avoid walmart not make up more than 5% of the US population? Those who are morally/politically against walmart, the very wealthy (likely have someone go for them, or don't shop at walmart), physically incapable, or not physically near (e.g. young people in cities with no car)
They are uniquely positioned to capture a huge chunk of internet traffic for enterprises. They are constantly releasing new features on AWS that greatly simplify the building huge projects. As time goes on, I think Amazon will have a huge number of major companies totally locked into AWS.
A quick google search show Apple had a profit of $11.5B last quarter while AWS alone brought in a net income of $1.4B, which is an increase of like 80% YoY. If they can maintain that level of growth for four years, then AWS alone will be be as profitable as all of Apple is now.
Most of the services AWS offers, are software services that have extreme margins. Competition isn't going to materially cut into that (which is why after all of these years of fierce competition, it hasn't).
Most analysts would disagree with you, as would I. They haven't been losing market share to anyone -- the market is just growing around them. There is very little overlap between Azure and AWS customers. MS has been knocking it out of the park growing Azure, but it's mostly been customers who would have been doing Windows in the datacenter if not for Azure. They aren't capturing much of the non-Windows market, other than as ancillary services that go along with Windows services that get moved to Azure.
Google is competing directly with AWS, and what they offer is technically superior, but they're still terrible at selling to the Enterprise, which is where all the money is. Sure, Google is getting a lot of small shops with a few developers, but all the real money is going to AWS, who is getting really good at selling to the enterprise, a hell of a lot faster than Google is.
(Microsoft has been making up for this by using their sales channel to port their existing customer base to Azure. This has worked out great for them, but their customer base is finite and aging.)
Hype, and a general misunderstanding of an overly generic term (cloud) ?