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Is, Inc. Actually Undervalued?

Monday, October 24, 2016 11:49
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amazon-a-logoRetail giant, Inc. (NASDAQ:AMZN) frequently comes under scrutiny due to its seemingly high valuation, but some new data points suggest the company may actually be undervalued by investors.

That’s because a large amount of the retail transactions conducted on Amazon’s platform doesn’t show up in its official market share numbers. From USA Today:

Amazon’s yearly sales account for about 15% of total U.S. consumer online sales, according to the company’s statements and the Department of Commerce.

But the Seattle e-commerce company may actually be handling double that amount — 20% to 30% of all U.S. retail goods sold online — thanks to the volume of sales it transacts for third parties on its website and app. Only a portion of those sales add to its revenue.

These numbers suggest that Amazon could be twice as big as many people give them credit for. That’s a scary proposition for the company’s competition, including Wal-Mart (NYSE:WMT), which was the original disruptor of the entire retail space.

Amazon, which increasingly can offer delivery in one to two hours, promises to be even more disruptive, said Jason Goldberg, senior vice president of commerce at Razorfish, an e-commerce marketing agency.

“The more power Amazon gets, the tougher it makes it for those independent retailers,” he said.

It’s not all bad news for independent retailers, however. Some companies even sell their goods exclusively on Amazon’s platform, which allows them to forego the overhead of associated with ordering systems, customer service, and the like. Of course, those goods arrive at shoppers’ homes in Amazon-branded boxes.

And that means we’ll likely begin hearing an updated adage: “All roads lead to Amazon.”

Amazon shares rose $15.49 (+1.89%) to $834.48 in Monday afternoon trading. Year-to-date, AMZN has gained 23.47%, versus a 5.36% rise in the benchmark S&P 500 during the same period.


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