There’s been talk of Apple Inc. (NASDAQ:AAPL) carrying the iPhone maker to a $1 trillion valuation for more than a year, but talk about Amazon.com, Inc. (NASDAQ:AMZN) has emerged more recently. The two companies are in a race of sort, with analysts debating which company will reach a 13-figure market capitalization first. Some put Apple there by the end of the year, although Amazon might not reach that level until the end of next year or later.
Still, Apple stock has been volatile around this year’s iPhone release, putting that blue skies scenario of a $1 trillion valuation within the next 45 days in jeopardy and giving Amazon a shot at beating out the Cupertino giant.
Apple stock at $200 for a $1 trillion valuation
Apple stock tumbled by about 1% intraday on Tuesday, dragging the company’s stock further below the record high of $900 billion from earlier this month and making that $1 trillion market cap seem even further away.
Drexel Hamilton analyst Brian White described Apple as a “trillion dollar [sic] baby” in a note late last week. He reported that sales from Taiwan-based suppliers in his Apple Monitor were weaker than typical seasonality in October, although the September quarter was the best ever recorded. Sales rose 1% month over month, compared to the 12-year average increase of 7%, although that was after five straight months of growth that was better than typical seasonality. White has a $235 price target on Apple stock, which would give the company a market cap of $1.2 trillion.
Chart technician and TradingAnalysis founder Todd Gordon told CNBC recently that he sees Apple at a $1 trillion market cap by the end of this year. He bases this timeline on the “very strong” uptrend he sees back to the summer of last year. Parallel lines on the Apple stock chart lead him to believe that the shares could rally to about $200 per share, which would bring the company’s market cap past $1 trillion.
Amazon stock to $2,000
Amazon stock had its ups and downs on Tuesday as first it shot upward as high as $1,138 before falling closer to $1,131. Morgan Stanley analyst Brian Nowak made the case for a $1 trillion valuation for the online retailer in a note this week. His current target price for Amazon stock is $1,250, but to reach a $1 trillion market cap, the shares need to reach $2,000.
At a nearly $1 trillion valuation, Nowak values Amazon’s core retail business at $600 billion, Amazon Web Services at $270 billion, Prime subscriber revenues at $70 billion, and the new ad business at $55 billion.
The core retail valuation is based on first-party operations reaching 5.5% operating margins in 2022 and third-party reaching an EBITDA margin of 25%. Based on all these numbers and discounts from 2022 to 2018, Nowak reaches a $1 trillion valuation at the end of next year.
Will Apple or Amazon win the race?
At approximately $545.16 billion, Amazon’s current market cap is much lower than Apple’s, so the online retailer has a lot more ground to cover in order to reach $1 trillion. Amazon stock has surged so fast with this year’s tech rally that it has added approximately $185 billion to the company’s market cap year to date. Apple stock has also benefited from the tech rally, also adding roughly $270 billion to the iPhone maker’s market cap.
If the two firms continue to move in sync, then Apple certainly will lap the $1 trillion level before Amazon. However, if the iPhone X doesn’t turn out to be everything Wall Street hopes it will be and Apple stock stumbles while Amazon continues to skyrocket, then Amazon just might have a shot at being first.
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