Amazon.com (AMZN) is having a terrific 2024, or exactly the sort of performance long-time shareholders have come to expect.
Indeed, truly patient investors in Amazon stock have enjoyed market-crushing returns.
Amazon, which joined the Dow Jones Industrial Average in February, suffered some profoundly painful drawdowns over the past three years. From peak to trough, Amazon stock lost over half its value, wiping out more than a trillion dollars in market value at one point in the process.
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But, hey, that’s just the price of admission to one of the best stocks of all time.
Amazon, which began life as a modest website for book buyers, went public in 1997, and has since generated truly outsized wealth for shareholders. An analysis by Hendrik Bessembinder, finance professor at the W.P. Carey School of Business at Arizona State University, found that Amazon was one of the 30 best stocks in the world over three decades.
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 cloud-based services and artificial intelligence (AI), and a leader in streaming media and digital advertising.
Amazon has a massive footprint in the analog world too. It owns the Whole Foods grocery store chain and maintains sprawling logistics operations. The latter comprise a vast assemblage of distribution centers and fleets of commercial aircraft and trucks, among other capital intensive assets.
But let’s face it: Amazon, like most of the other Magnificent 7 stocks these days, is benefitting from the seemingly boundless exuberance over all things AI.
The bottom line on Amazon stock?
(Image credit: YCharts)
Which brings us to what $1,000 invested in Amazon 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 a couple of decades ago, it would today be worth about $96,000. That’s good for an annualized total return of 25.6%.
By comparison, the same sum invested in the S&P 500 over the same time frame would theoretically be worth about $7,400 today. That comes to an annualized total return (price change plus dividends) of 10.5%.
If past is anything like prologue, Amazon will continue to outperform the broader market at a healthy clip. For its entire history as a publicly traded company, Amazon stock generated an annualized total return of 32.2%. The S&P 500 generated an annualized total return of 10.5% over the same span.
Put another way, Amazon stock has more than tripled the performance of the broader market since it went public. The way things are going so far in 2024, bulls are probably feeling pretty confident about Amazon keeping its streak alive.
Wall Street sure thinks it can – at least over the next 12 months or so. Of the 61 analysts issuing opinions on Amazon surveyed by S&P Global Market Intelligence, 44 call it a Strong Buy, 15 say Buy and two have it at Hold.
That works out to a rare consensus recommendation of Strong Buy, and with high conviction to boot. Indeed, Amazon has the highest rating of all Dow Jones stocks.