Brian Nichols - January 12, 2017
If you analyze Amazom.com Inc (NASDAQ:AMZN) like any other company (retail or tech), there’s no question AMZN stock is overvalued. It is an absolutely undeniable fact. There is simply no way to justify a near $400 billion market capitalization, especially when a company like Alibaba Group Holding Ltd (NYSE:BABA) is larger by GMV and has a larger investment portfolio. Meanwhile, BABA stock supports a market capitalization of $235 billion.
Therefore, BABA stock is the better long-term investment, but that’s neither here nor there. What makes Amazon stock so hard to assess is Bezos, and just how fast the company is innovating and disrupting every industry it touches. For example, who could predict Bezos’ plan to hire 100,000 people over the next 18 months? Keep in mind, Amazon.com has a current headcount of 180,000, and it took the company five years to create 150,000 jobs. So, how does Amazon create so many jobs this fast?
How Amazon creates 100,000 jobs so fast
While Jeff Bezos notes its customer service network, fulfillment centers, cloud technology, machine learning, and advanced logistics as areas where it looks to grow, 100,000 new jobs suggests the formation of a specific business that requires a lot of manpower. I think it is quite obvious that Amazon.com will pursue its AmazonGo physical grocery retail business much faster than previously disclosed.
Furthermore, it is quite evident that Bezos has big plans for a previously reported trucking app that too will require a significant increase in headcount. Keep in mind, Amazon’s addressable market in logistics is valued upwards of $1 trillion, and grocery retail is an $800 billion market.
The best way to play AMZN stock
Granted, BNL Finance is highly skeptical that Amazon.com’s trucking ambitions will be successful in large scale, but AmazonGo really is transcendent. Initially, BNL Finance identified 2017 as a bit of a bridge year for AMZN, and downgraded AMZN stock from Buy to Sell at $830/share. That’s because we believed it would take Amazon.com several years to make a dent in the grocery retail space, or in logistics.
However, it is highly likely that Amazon.com is moving faster than we expected. So when you start to look at the potential in e-commerce, the cloud, AI, analytics, online and retail grocery, and logistics, AMZN stock looks cheap with a near $400 billion market capitalization. Hell, Amazon could very well be a trillion dollar company with success in these major industries.
After all, Amazon.com is one of the few companies you have to give the benefit of doubt. They simply hit home-runs in every industry they enter.
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