Amazon shares have been up more than 1% today to $2,038, just shy of the $2,050 level that conferred the $1 trillion valuation. Tech stocks overall have pushed the major stock indices to new highs in 2018, though today they have dipped into the red.
After doubling in price over the past year, Amazon stock passed the $2,000 mark on August 30. For historical context, it reached $1,000 in October 2017 after cracking the $100 barrier in October 2009.
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Apple reached the $1 trillion milestone about a month ago.
Why all of the fresh enthusiasm about Amazon? Its Goliath-like strides into groceries and pharmaceuticals are factors, but another big one is advertising. The company is taking steps to make its presence felt in the $88 billion annual online ad market. One initiative is selling ads that air during streams of NFL Thursday Night Football games.
But the prevailing strategy is to inject ads into a range of places on its platforms. Last month, for example, the company added a $9-a-month premium tier to Twitch, the video game streaming service it acquired in 2014. Users who did not opt into that subscription level will soon start seeing ads.
A recent report by Morgan Stanley analyst Brian Nowak said advertising would propel the category of “other” revenue and pace overall progress through 2022. In his “bull case,” the company will generate a 25% compound annual growth rate for subscription revenue, 33% for its Amazon Web Services cloud business, and 37% for “other” revenue.
Even without a fully mature advertising business, Amazon’s earnings in recent quarters have been soaring above analysts’ estimates, another reason for the stock surge.
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