Some believe $1 trillion is too much for any publicly traded company — no matter how profitable and successful. The facts, however, point at the possibility of both companies reaching the $2 trillion threshold. And one expert is already sure — Amazon will get there sooner.
Tom Forte from D.A. Davidson & Co. (a private US-based boutique investment firm) said on Tuesday that Amazon has more room to grow and will, therefore, the first one to reach the $2 trillion mark. Amazon Web Services is responsible for the company’s unprecedented growth and is believed to continue pushing up the AMZN stock price. According to Forte, the unit has “been a godsend for the company’s profitability and, ultimately, its share price.” Non-core areas, of which Amazon Web Services being the most prominent one, will fuel the growth of the company in the coming years and months. Online pharmacy Pillpack and organic products supermarket chain Whole Foods Market have been recently added to the business portfolio of Amazon. Some go as far as to assume that Landmark, a movie theatre chain, will be the next major acquisition made by the Jeff Bezos’ corporation.
Forte, whom we have already cited in this article, believes that two other business areas may be of prime importance for Amazon on its quest to $2 trillion. Surprisingly, those are gas stations and travel. Costco, therefore, can be seen as a role model for Amazon, as an American corporation already operates gas stations at some of its warehouse facilities. Unexpected synergy can be received by combining different business units. For example, drivers can be lured into Amazon stores by simply offering them fuel discounts. Yet, it is still unclear how the company could get into this business.
Amazon has already tried getting into travel but can do so again. There are plenty of things Amazon can do better: from cruises and car rental to airline tickets and hotel reservation. An Airbnb-like service can also be a viable option, as well. Morgan Stanley has released a report back in March, where the possibility of Amazon entering the travel industry was mentioned. Even gaming business cannot be completely ruled out.
“Amazon continues to fire on all cylinders. This is unequivocally a franchise that gets stronger as it gets bigger,” stated Matt Benkendorf, chief investment officer of Vontobel Quality Growth.
In order to reach the $2 trillion mark, AMZN stock will need to double, which the company proved possible over the course of the last 12 months. All in all, in the last 5 years, Amazon has demonstrated 600% growth.
Apple, which is not intending to get into non-core business areas, cannot be expected to enjoy synergy effect from multiple businesses in related fields. This company can only rely on its core areas of expertise, namely computer electronics, software and online services. Apple’s growth sustainability is questioned by a number of professional investors. Analysts believe Amazon earnings will grow on average 46% a year over the next 5 years, while Apple will only be able to demonstrate a 13% increase.
All of the above makes certain experts believe Amazon would be the first one to become the world’s first $2 trillion company. Can we already say how much time will it take? Nobody knows the exact date. Yet, it can be estimated that it will take Bezos’ company much less time than it took to cross the $1 trillion threshold.Trade now
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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