Shares in Amazon.com (AMZN) have been on such a tear along with the other Magnificent 7 stocks that it's easy to forget they're still about 10% below their record close.
While that's bad news for anyone who committed fresh capital to AMZN stock around three years ago, it hasn't much hurt truly long-term shareholders. Indeed, they have enjoyed market-crushing returns.
Amazon, which began life as a modest website for book buyers, went public in 1997, and has since generated truly outsized wealth for shareholders. Indeed, Amazon stock ranks as one of the 30 best stocks of the past 30 years, according to an analysis by Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.
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Between its initial public offering in 1997 and December 2020, Amazon stock created nearly $1.6 trillion in wealth for shareholders, according to Bessembinder's model, which includes cash flows in and out of the business and other adjustments.
Amazon's emergence as the nation's largest e-commerce company is only part of the story behind its extraordinary wealth creation. The firm is a giant in the fast-growing industry of cloud-based services, a leader in streaming media and has enjoyed explosive growth in revenue from digital advertising.
Amazon has been quite busy in the analog world too. For example, it owns the Whole Foods grocery store chain and built its own freight and logistics operations. The latter operations comprise a vast assemblage of distribution centers, as well as fleets of commercial aircraft and trucks.
AMZN stock took a turn for the worse in 2022, however, erasing a large chunk of its hard-won wealth creation. Shares have clawed back most of their losses in the currnt bull market, but Amazon remains about 10% below its record closing high set in July 2021. That equates to about $80 billion in market capitalization, or the entire value of, say, Sherwin-Williams (SHW).
Bulls contend that investors and traders overreacted to the post-pandemic slowdown in Amazon's traditional retail business. More importantly, the market neglects to value Amazon stock properly when accounting for its Amazon Web Services cloud business, bulls say.
The bottom line on Amazon stock?
(Image credit: YCharts)
Which brings us to what $1,000 invested in AMZN stock 20 years ago would be worth today.
As you can see in the above chart, if you had invested $1,000 in Amazon stock in early February 2004, it would today be worth almost $74,000. By comparison, the same sum invested in the S&P 500 over the same time frame would theoretically be worth about $6,500 today.
If past is anything like prologue, Amazon will eventually reclaim its historically lofty heights. For its entire history as a publicly traded company, Amazon stock has generated an annualized total return of more than 32%. The S&P 500 generated an annualized total return of 10.3% over the same span.
Put another way, Amazon stock has more than tripled the performance of the broader market since it went public. Bulls have every expectation that it will keep that streak alive.
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