Amazon at 20: some shareholders have gained 49,000pc, others lost 94pc

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Investors who stuck with Amazon over the past two decades would have enjoyed a return of nearly 49,000pc, despite a 94pc collapse in its shares when the tech bubble burst at the turn of the millennium.

This week marked the 20th anniversary of the online retail giant’s public listing.

The stock has been “split” multiple times over its lifespan. Share splits involve investors being given, for example, 10 shares for each they already own. This dilutes the value of each share but prevents them becoming prohibitively expensive.

Adjusting for share splits, Amazon closed its first day of trading on May 15 1997 at $1.96 a share, after a 30.5pc rise that day. Today the stock trades at $959.

However, the ascent of Amazon’s share price has not been smooth. During the 1999 tech bubble it hit a high of around $107 before collapsing to $6 by late 2001 – a 94pc loss.

Many retail investors own Amazon through funds, as it has become a perennial favourite of professional investors who target growth.

Of the 3,636 funds included in the classification system of the Investment Association, the trade body, 113 have Amazon as a top-10 holding, according to data service FE.

A constant cause of concern for many investors is the company’s valuation, and whether it can be justified.

On a price to earnings (p/e) basis, it has repeatedly looked untenable. The p/e ratio measures share price relative to annual earnings per share. At times Amazon’s p/e has registered in the thousands, and its average since 1997 is 236.

Today it sits at 182 according to data service Bloomberg, compared with 23 for the wider US market.

These valuations have not prevented the share price from rising, and many investors see Amazon as unique and almost impossible to imitate.

The business is notoriously guarded in terms of explaining its investments – even to fund managers – but many investors believe in its ability to innovate and disrupt existing sectors to continue to deliver growth.

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