As Amazon becomes 25, D.A. Davidson analysts publish the experienced lessons

Amazon was 25 years old this week. In its quarter-century existence, it has created about one billion dollars in shareholder value.

Amazon dominates e-commerce, has the largest cloud computing infrastructure that offers and leads the home staff market with Alexa technology. In addition, it has a burgeoning online advertising business and becomes a Hollywood force through its video streaming division. Total sales jumped 31% last year to $ 232.9 billion.

Tom Forte from D.A. Davidson, one of the most bullish Wall Street analysts at Amazon, said in a report on Friday that the company has developed a number of strategies for others to learn and even copy. Here's what he laid out, along with some concrete examples.

Focus on Customers, not Competitors: CEO Jeff Bezos has been a customer-occupied since he started the company in 1[ads1]994 as an online bookstore. According to Forte, it has been Amazon's most important durable quality – focusing on customers, not competition.

A recent example is the private label business where Amazon sees what customers want most and tries to give it at the lowest price by making its own branded version.

Iterate: Amazon values ​​iteration, "makes continuous improvements to improve its efforts."

Examples: The Kindle e-reader has continued to evolve to keep up with versatile tablets, and the echo has gone from a basic voice assistant to a platform for developers to provide all kinds of help to customers.

Create a flywheel : Focus on having the lowest prices, largest selection and fastest delivery and customers will continue to come back. This customer volume attracts suppliers and other partners, which in turn increases competition in these areas – price, variety and delivery speed – which in turn draws more customers and so on.

A recent example of this is when Amazon introduced one-day shipping for its Prime customers. While this increases Amazon's short-term costs, a recent RBC survey shows that customers spend more and are more loyal when they get this benefit.

Embrace change: This is a core value from Zappos, the electronic shoe seller Amazon bought in 2009.

Examples: Amazon Web Services has proven to have software that developers require as technology changes, and the company has made important acquisitions in the smart home market, such as the smart doorbell maker Ring, as consumer behavior has evolved.

Losing money as a strategy: Forte calls it LmaS and says that Amazon has perfected it. Investors subsidized the company for two decades so that it could maintain the smallest margins, while Amazon continued to invest in making shopping easier, cheaper, and faster, and developing other, more profitable businesses. Thanks to AWS and its advertising business, Amazon finally shows real revenue but still far slimmer margins than other tech giants like Alphabet, Facebook, Apple and Microsoft.

"Before it was Uber, Pinterest, and apparently, every other newly created IPO and also Roku, Shopify, Wayfair, was Amazon," says Forte. "The company was either the first or at least the best to lose money in its first party sales effort to take market share. Its ability to develop other, more profitable ventures (like third-party retail, cloud computing and, more recently, advertising) has further improved its ability to pause its first-hand business itself (if not worse), and this is one of the main reasons why it has been so disturbing in the retail trade. "

[19659002] In the report, Forte marked two key areas where Amazon has gone down: smartphones and Chinese e-commerce. The latter says he is Amazon's biggest failure, and it must continue to find a strategy that succeeds in China, no matter how many times it fails. "

He also sees four significant dangers for Amazon over the next 25 years, including finding out who is to succeed Bezos," a once-in-a-generation type of founder and CEO, and working on regulatory and law enforcement practices. earlier highlighted these issues in a May report.

At least, in the short term, Forte expects Amazon to navigate these challenges, with a $ 2,550 price target, a 32% gain from it and $ 1.26 trillion Only two of the 40 analysts with price targets tracked by FactSet have higher predictions, and the average price target is $ 2 249.73.

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