Amazon Joins the Trillion-Dollar Club
There are now two U.S.-based companies with a market cap exceeding $1 trillion. Not surprisingly, both are rooted in the tech sector. First, Apple crossed that threshold, and now Amazon has done the same, rising to that level from a mere $580 billion at the beginning of 2018.
Morgan Stanley recently raised its price target on Amazon stock, valuing it at $2,500 per share. That would give the Seattle-based e-commerce titan a valuation of $1.2 trillion, based on revenue growth projections of 24% per year through 2020.
If tech seems a likely launching pad for $1-trillion valuations, then Amazon’s other base—the retail sector—is harder-pressed to produce them. In the world of big-box brick-and-mortar stores, it would take the 2017 market caps of Walmart and 13 smaller retailers combined to reach $1 trillion.
The road to $1 trillion has been a long one for Amazon, although whether it’s been winding or straight and narrow depends on who you ask. Investors have wondered for years when Amazon was going to begin turning a profit, and the company’s stocks were priced accordingly.
Looked at it from Amazon’s standpoint, the past several years have been spent building the platform. The company has plowed revenues back into amassing a fulfillment center network, buying up companies and developing new technologies.
Now, Amazon is seeing the fruits of that platform-building in the form of several profit engines humming along simultaneously. Second-quarter net income jumped to $2.5 billion compared to $197 million a year ago. Driving that, according to CNN.com, has been Amazon Web Services, the company’s cloud business, along with revenues from advertising sales and Prime membership subscriptions.
“It’s too high of a bar to assume that they’ll succeed at everything that they do,” said researcher Daniel Martins, who once was skeptical of Amazon’s viability yet now believes the company could double in value by 2020. “But at the same time, I think Amazon is the best combination in the world of the scale of a large company and that entrepreneurial DNA with the spirit of a startup.”
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