What Amazon’s Move to Build New Headquarters Means
Mature tech stocks have seen tremendous growth
Mature tech stocks have been the darlings of the market since the financial crisis. While the S&P 500 Index (SPY) has surged by 163% in that period, the tech-heavy NASDAQ Composite Index (QQQ) has galloped by 330% in the same period. Mature tech companies like Apple (AAPL), Google-parent Alphabet (GOOGL), Amazon (AMZN), and the likes have seen even better returns during that period.
Amazon (AMZN) announced last week that the company will build a second “full equal” headquarters in North America in a move that highlights the ambitions of the swiftly growing company.
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Amazon is growing differently than rivals
While all big tech companies have seen growth, Amazon seems to be growing differently. The likes of Facebook (FB), Apple, and Alphabet are generating most of their revenues from their respective core businesses. For instance, Apple derived more than 50% of its revenues from iPhones in the most recent quarter.
Amazon, on the other hand, is not only a major player in e-commerce, it is also a pioneer in cloud services, while also competing with the likes of Netflix (NFLX) by offering quality original content among other businesses. The behemoth has also stepped into groceries now with its acquisition of Whole Foods (WFM).
The graph above shows Amazon’s trailing-12-month spending on research and development. The company had spent $17.4 billion as of fiscal 1Q17. The company is the biggest spender on R&D in the tech sector. The company continues to spend a lot and invest in new businesses. No wonder it is trading at ludicrous valuations of 250x earnings.