Amazon has been one of Wall Street’s darlings in the past decade. Amazon’s stock price jumped 234 percent in the past five years alone, giving the company a valuation of around $120 billion.
In those five years, Amazon’s sales have tripled to more than $60 billion a year, while its profits stayed remarkably flat. The reason for Amazon’s stagnant profit is its founder’s notorious commitment to long term growth. Jeff Bezos, who founded Amazon in 1994 and has lead the company ever since, has a track record of investing everything his company earns right back into it.
Defending his investment strategy in his latest letter to shareholders, Bezos wrote:
“Proactively delighting customers earns trust, which earns more business from those customers”.
This way, Amazon became the largest online retailer in the world, and in the same way the company is now striving to become a dominant force in the distribution of digital media.
So far, investors seem to believe in Amazon’s long term success, but some day the company is going to have to proof it can turn a sizeable profit.
It is as Bezos recently noted: “In the short run, the market is a voting machine but in the long run, it is a weighing machine. We’re always working to build a heavier company.”