The downside for investors of some of the largest and most successful companies in the world is that at some point, a company’s success can start to limit its future growth. Fortunately for Amazon.com, Inc. (Nasdaq: AMZN) investors, there are plenty of growth opportunities out there even at Amazon’s massive size.
With a market capitalization of $777 billion, Amazon is the second-largest company in the S&P 500 and is one of only 24 mega-cap companies valued at more than $200 billion. Many of these companies struggle to deliver double-digit revenue growth, but Amazon has consistently reported growth at or above 22 percent in recent quarters.
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MKM Partners analyst Rob Sanderson says there’s no reason to think revenue growth will slow down soon. According to Sanderson, Amazon’s key markets are nowhere near saturated.
“We continue to view Amazon as the best long-term growth story among the mega-caps,” Sanderson says.
Sanderson says Amazon still has a long way to go before it reaches maximum market penetration.
“The brand, logistics infrastructure, secular trend and management competency will continue to drive meaningful share gain, and penetration of its primary end markets is below penetration of verticals for its mega-cap peers,” he says.
In fact, MKM projects Amazon’s U.S. retail market share will triple over the next seven years. Sanderson estimates Amazon’s share of total U.S. retail sales will grow from 5.2 percent in 2017 to 14.5 percent by 2025. By that time, he says third-party sales will represent about 80 percent of Amazon’s e-commerce business.
In fact, Amazon is growing so fast that some analysts say it could pass Apple ( AAPL) on its way to a historic milestone.
“We believe that even without margin expansion in core retail, the other businesses can drive significant profit growth over the coming years and will make AMZN the first $1 trillion company,” Macquarie analyst Ben Schachter wrote last month, according to CNBC.
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AMZN stock has already gained another 37.6 percent so far in 2018, more than any other mega-cap stock in the S&P 500. Amazon would need to gain another 21 percent to reach Apple’s market cap of $947 billion.
MKM has a “buy” rating and $1,840 price target for AMZN stock.
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Amazon.com, Inc (AMZN) Stock Stands Out Among Mega-Caps originally appeared on usnews.com
