In the realm of tech giants, there’s a silent force that has been steering the payment landscape – Stripe. Amidst its remarkable influence, a new frontier of competition has emerged, taking center stage in the cloud domain, where Amazon.com is making bold moves. This clash of titans signifies a profound shift that investors should closely monitor.
At its core, Stripe operates as a linchpin of infrastructure. Offering a gateway for businesses to process online payments, this Dublin-based powerhouse charges around 3% per transaction. Its Application Programming Interface (API) seamlessly integrates with websites, enabling customers to swiftly engage in transactions. Unlike its main rival PayPal, Stripe eliminates the need for buyers to establish third-party accounts, simplifying the process.
The introduction of the Stripe API revolutionized payment processing, propelling it to dominance.
Founded by Patrick and John Collison, hailing from the quiet town of Dromineer, Ireland, the duo’s brilliance was evident from their formative years. After establishing their prowess at MIT and Harvard, they launched Auctomatic in 2009. This software tool, aiding eBay sellers in managing listings, was swiftly acquired, and the foundation for Stripe was laid.
The aftermath of the 2009 financial crisis saw the surge of startups leveraging APIs for rapid scalability. The Stripe API became integral to various ventures like Lyft and Shopify, facilitating seamless online transactions. Venture capital inflow followed suit, culminating in a 2016 funding round that garnered $150 million, valuing Stripe at $9.2 billion. CapitalG, Alphabet’s investment arm, co-led the investment.
Amazon’s strategic alliance with Stripe in 2017 was a pivotal moment, setting the stage for the current unfolding saga. This partnership is now evolving into a more extensive collaboration.
Recent developments showcase Amazon and Stripe deepening their connection. According to a Stripe press release, the collaboration expands to encompass various Amazon subsidiaries across the United States, Europe, and Canada. Stripe will function as the payments partner for entities like Prime, Audible, Kindle, Amazon Pay, and more. In return, Stripe commits to broadening its usage of Amazon Web Services (AWS).
The battle for cloud supremacy is heating up in 2023, with cloud infrastructure and platform services predicted to reach $150.2 billion and $136.4 billion respectively, as per Gartner’s research report. Amazon, with a 25.9% market share, leads this charge, yet competitors like Microsoft and Alphabet are fast gaining ground.
This isn’t Amazon’s first cloud duel; Netflix chose Microsoft over Alphabet for its digital advertising endeavor in 2022. The war for top-tier clients intensifies, dictating the future of workflow processing and digital storage.
Winning Stripe, a valuation powerhouse at $74 billion, is a colossal victory for AWS, an underlying pillar of Amazon’s operations. Often overlooked by investors, AWS recorded $20.5 billion in sales during Q2 2022, boasting a remarkable YoY growth of 33%. This division contributes 16% of Amazon.com’s net sales and generated profits of $5.4 billion.
While the metrics might seem steep – trading at 63.5x forward earnings and 2.1x sales at $102.24 – historical trends suggest these figures are undervalued. As Amazon’s shares break through the downtrend, seizing opportunities amidst potential declines, the stock’s journey takes it toward $120 and $138.50, marking the next echelons of resistance.
Amidst this unfolding saga, the stage is set for Amazon to solidify its cloud dominion, leveraging partnerships to drive innovation and redefine the digital landscape. Investors, attuned to the seismic shifts, are poised to navigate these uncharted waters.
