Amazon hits record highs, but what now?

This year has been extremely difficult for businesses all around the world. Unless, of course, you’re Amazon.

As of 19 June, the online giant’s stock was up 43% since the beginning of the year when its share price hit an all-time high of $2,688. Having already carved out a leading market position, Amazon was in an extremely good place to take advantage of Covid-19. With millions around the world living under lockdown, Amazon’s service offering – backed up with an industry-leading use of AI and automated warehouse coordination – became even more relied upon. 

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So how much better can things get for Amazon?

The company has always shown tremendous ability to break into new markets (for instance into media with the highly popular Amazon Prime platform), so, too, its potential to make a success of future acquisitions and a proven ability to protect its market position.

But although Amazon has undoubtedly done extremely well, how much further growth can it realistically achieve? This is because no company, whatever its size, is immune to challenges and Amazon has a few of its own to face. 

First, is there a danger of this company growing too much? Currently, it is the second-biggest company in the US by revenue (behind Walmart), and experts are divided as to whether or not growth can continue at this pace.

Second, Amazon’s size will increasingly attract regulatory scrutiny — which brings risk. Similar businesses like Apple, Facebook and Alphabet already regularly receive critical attention from policymakers over issues like tax and data privacy. Amazon’s sheer dominance in retail has already brought some to question if a monopoly has been created – with Tesla CEO Elon Musk even calling for the retailer to be broken up.  

And third, Amazon is increasingly facing new competitors. Even though it isn’t in danger of being overtaken anytime soon, these smaller companies  – like Shopify – might present more upside for investors.

However, Amazon may face challenges but the way in which it survived and thrived during Covid-19 warrants real attention. When we consider we are entering a new normal, living with the very real threat of new outbreaks, Amazon is extremely well-placed for such a challenging operating environment.

Excitingly, if Amazon continues to succeed during these uncertain times, it’s possible the giant may be entering a new phase of growth over the long term.

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