Amazon on Its Way to Becoming Second Most Valuable Company

By Douglas A. McIntyre Updated Jan 12, 3:22AM EST · Published Feb 15, 6:45AM EST

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Amazon on Its Way to Becoming Second Most Valuable Company — © courtesy of Amazon.com Inc.

Amazon.com Inc. (NASDAQ: AMZN) has passed Microsoft Corp. (NASDAQ: MSFT) to become the third most valuable publicly traded U.S. company. It has pulled close to passing Alphabet Inc. (NASDAQ: GOOGL) for second place, behind only Apple Inc. (NASDAQ: AAPL).

Amazon’s market cap is $702 billion as of February 14. Alphabet’s is $740 billion and Apple’s is $849 billion. Amazon has been the market’s favorite by far over the past year. Its shares are up 28% over the period. The Nasdaq is higher by 5%, while Apple’s shares are down 2% and Alphabet’s up 2%.

Amazon seems poised to continue its market success. That is based partly on strong earnings. As much or more is based on its leadership in cloud computing. Last year, the Amazon Web Services revenue rose to $17.5 billion from $12.2 billion in 2016. Operating income was $4.3 billion, up from $3.1 billion a year earlier.

The enthusiasm about Amazon also has a foundation in its expansion into groceries and consumer electronics, its Prime loyalty program and premium streaming entertainment. Year after year, the company diversifies, mostly successfully.

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Prime is among Amazon’s most ingenious inventions. Most research shows that Prime members, who get free shipping on most orders and access to Amazon’s premium video library, buy more from Amazon than nonmembers. Amazon has indicated Prime is growing quickly, without giving numbers. It has been able to raise the base price for the service as well.

Amazon’s home intelligent assistant devices, led by Echo, have been a large success. Most research indicates these products are well ahead of similar ones from Apple and Google. And these devices are the future of home and entertainment management.

Amazon has made investments of hundreds of millions of dollars in content, original shows, for its streaming media business. Those investments will grow. The company is in a war with studios, Netflix and Apple. Netflix is the current leader, and Amazon’s investment in programming may not get a strong return. However, for now, the investment is mostly viewed as necessary and wise.

Amazon currently holds a spot among America’s most innovative companies, and by some measures may even top the list. Investor enthusiasm, fueled by the innovation, likely will take Amazon’s market cap ahead of Alphabet’s.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.