Since its founding in 1994, Amazon has generated just $117 billion in cumulative free cash flow (FCF) on $721 billion in cumulative operating cash flow.
Despite producing relatively little FCF, Amazon has maintained a multi trillion dollar valuation for several years, and is valued currently at a $2.9 trillion MCap.
The key takeaway for investors is this: Contrary to finance theory, a company does NOT have to produce significant FCF relative to its valuation to keep growing its share price. All that is need is the 'prospect' of ever larger potential future FCF!
Growth beats cash flow any day of the week, over the long term.
As long as this 'carrot' dangling in front of investors is maintained a share price - as Amazon demonstrated for over three decades - will go up.
Years ago, I coined this seeming contradiction with theory the 'Amazon scenario'.
