Amazon is already valued as if it were a monopoly

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Centro de Amazon en Phoenix (Arizona, EE UU).
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His political detractors try to hang demands on him for what he can do, not for what he does now

Amazon says the idea that it is illegally squeezing its merchants is “exactly backwards.” California Attorney General Rob Bonta last week accused the company created and chaired by Jeff Bezos of violating antitrust law, in the biggest legal challenge ever for the $1.3 trillion e-commerce giant. Whether California’s position prevails or not, investors have already given Amazon a market valuation worthy of a monopoly.

The suit filed on the 14th blames Amazon for punishing retailers who put products at a cheaper price elsewhere, such as Walmart, Target or eBay, or even on their own websites, saying that this effectively establishes a price minimum for goods. California Attorney General Rob Bonta says Amazon’s rules keep prices artificially high.

Amazon, for its part, argues that forcing it to display products at higher prices would be “strangely” antithetical to antitrust goals. This is valid in the sense that competition authorities have tended to focus on consumer prices.

Amazon’s dominance in e-commerce may attract enemies, but it also gives it a premium price on the stock market. One way to value Amazon’s retail side is to remove its most profitable business, the Amazon Web Services cloud, from the equation. If valued at the same revenue level as Oracle, that division would have an enterprise value of $370 billion, leaving the retail business at close to $1 trillion.

That valuation is more than double Amazon’s retail sales last year. But there is another way of looking at it. Its rivals Walmart and Target are trading at less than 0.9 times its revenue. If we take that base as a reasonable multiple for Amazon once it reaches maturity, it’s like investors saying the company can generate more than $1.1 trillion in sales. If two-thirds of that number comes from North America, that’s equivalent to Amazon taking 75% of the US e-commerce market.

Amazon’s revenue is nowhere near that figure yet. However, that higher valuation is an implicit reflection of the company’s potential market power. This isn’t very helpful to Amazon’s political detractors, as they try to hang demands on what the company does now rather than what it might do later. But in the long run, either California is getting it exactly backwards, or Amazon shareholders are.

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Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.