One of the most closely watched events on Wall Street is the race to see which company will be first to make it to a $1 trillion market cap. Amazon.com, Inc. (Nasdaq: AMZN) has yet to hit an $800 billion market cap, but GBH Insights head of technology research Daniel Ives says Amazon’s businesses may already be worth $1 trillion.
Amazon’s stock once again hit a new all-time high on Monday, bringing its market capitalization to around $734 billion. Amazon currently trails Apple Inc. ( AAPL, $908 billion) and Alphabet ( GOOG, GOOGL, $793 billion) in the race to $1 trillion, but there’s a strong case to be made that Amazon is in the hunt. In the past year, Amazon’s market gap increased by nearly 28 percent, dwarfing both Alphabet’s 8.1 percent growth and Apple’s 2.3 percent growth.
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Ives says the value is already there for Amazon, even if it takes the market a little while longer to recognize it.
“In our sum-of-the-parts valuation, we believe Amazon is worth between $900 billion to $1 trillion, with the bread-and-butter consumer piece worth between $600 billion to $650 billion and the AWS/enterprise segment worth between $300 billion to $350 billion,” Ives says. “While a trillion-dollar market cap will not happen overnight, we believe the path is now set for this to occur over the next 12 to 18 months as the [CEO Jeff] Bezos strategic path both on the consumer and enterprise fronts are still in the middle innings of playing out and Amazon remains a green light name to own at these levels in our opinion.”
For investors concerned about buying Amazon so late in the game, MKM Partners analyst Rob Sanderson says Amazon’s cloud services and advertising businesses are still in the rapid expansion phase. Fortunately for Amazon investors, both businesses are high-margin operations, which Sanderson says will give Amazon even more long-term earnings leverage.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
“We continue to think AMZN is the best growth story of all the mega-caps over the very long term,” Sanderson says.
GBH has a “highly attractive” rating and $1,850 price target for Amazon. MKM has a “buy” rating and $1,750 price target for AMZN stock.
The two target prices represent market caps of $895 billion and $847 billion, respectively. Amazon will need to hit a per-share price of $2,067 to reach the $1 trillion mark.
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Amazon.com, Inc. (AMZN) May Already Be Worth $1 Trillion originally appeared on usnews.com
