Uncovering the High-Performing Investment Option Potentially Soaring to Join Apple, Nvidia, and Microsoft in the $3 Trillion Valuation Bracket by 2028.
Uncovering the High-Performing Investment Option Potentially Soaring to Join Apple, Nvidia, and Microsoft in the $3 Trillion Valuation Bracket by 2028.
In the past, industrial and energy corporations reigned supreme, but times have shifted. Back in 2004, General Electric and ExxonMobil were the world's most valued publicly traded companies with market caps of $319 billion and $283 billion respectively. However, the digital age has taken over, and now, data is considered the new gold, with tech giants dominating the scene.
Currently, Apple and Nvidia are in a fierce competition, each boasting a market cap of $3.4 trillion. Microsoft follows closely behind with a market cap of $3 trillion. With a current market cap of $2.1 trillion, Amazon seems poised to join this exclusive $3 trillion club. The stock has seen a staggering 39% growth over the past year and an impressive 132% increase over the past five years, indicating that its entrance into the elite group is imminent.
The economy seems to be on the rebound, which will likely fuel Amazon's growth further. Add to that its dominant positions in various sectors and a strong performance in AI, and Amazon appears to have all the necessary components for membership in this esteemed organization.
A recovering economy
The main impediment holding Amazon back in the recent past has been a struggling economy. Fortunately, it appears that the economic downturn and its record-high inflation might be in the rearview mirror. Consumer confidence is at its highest level since March 2021, with anticipations of a recession dropping to their lowest in over two years. Additionally, the Federal Reserve Bank recently made its second interest rate cut following a long hiatus, and the unemployment rate remains historically low. These improvements have contributed to the growth of e-commerce and cloud spending, which is evident in Amazon's results.
In the third quarter, Amazon's net sales reached $159 billion, recording an accelerated 11% year-over-year growth, while its diluted EPS increased 52% to $1.43. Each of Amazon's key operating segments played a role in these positive results. Its North American sales increased by 9% year-over-year, while international sales saw a 12% leap. Amazon Web Services, its cloud computing business, also saw a 19% surge, marking its highest rate of growth in nearly two years. Lastly, the company's advertising segment, which reaches into every corner of its expanding empire, also grew by 19%.
Pioneering and leading
Amazon was a trailblazer in the e-commerce industry and still maintains its dominance. According to data, the company accounted for 38% of all U.S. online retail sales last year, leaving its closest competitors far behind. Amazon is expected to continue its leadership in this sector through 2024, with a predicted 40% share of online sales in the U.S. this year.
Amazon also led the way in cloud infrastructure services, or cloud computing, a field it continues to dominate. Amazon Web Services controlled 33% of the market at the end of the third quarter, with Microsoft Azure following in second place and Alphabet's Google Cloud in third. However, AWS cannot afford to take its lead for granted, as both Azure and Google Cloud outpaced its 19% year-over-year growth in the third quarter.
Amazon's position as the cloud leader provides it with a competitive advantage when it comes to distributing AI models and providing related services to its customer base. Amazon has a rich history of using AI to make product recommendations, manage inventory levels, and optimize delivery routes.
A hidden gem within Amazon's empire is its advertising segment. Amazon has expanded beyond the digital real estate of its e-commerce website, making ads the default for its Prime Video, Amazon Music, and Twitch video game streaming services. Last week, the company announced it would be integrating its Freevee streaming service into Prime Video, increasing advertising opportunities even further. It's no wonder, then, that advertising has been Amazon's fastest-growing business in recent years.
On the path to $3 trillion
Currently, Amazon's market cap is approximately $2.1 trillion, but to reach $3 trillion, it would need a stock price increase of around 42%. Based on Wall Street's predictions, Amazon is expected to generate revenue of $637.7 billion in 2024, giving it a forward price-to-sales (P/S) ratio of approximately 3. If its P/S ratio remains constant, Amazon would need to increase its revenue to approximately $902 billion yearly to maintain a $3 trillion market cap.
Wall Street is projecting revenue growth of 11% per year over the next five years for Amazon. If the company can achieve this rate, it could join the $3 trillion club as early as 2028. It's worth noting that Amazon has grown its revenue by an impressive 442% over the past decade, making this hurdle less daunting.
Furthermore, Amazon is currently selling at a multiple of 3.4 times sales, which aligns with its average multiple of 3.3 over the past five years. Given its numerous industry-leading businesses and abundant growth potential, this seems like a fair price to pay.
With the recovering economy boosting consumer confidence and e-commerce sales, Amazon's stock has seen significant growth, increasing by 39% over the past year and 132% over the past five years. This strong performance could potentially help Amazon join the exclusive $3 trillion club.(finance, money, investing)
Given Amazon's strong financial performance and leadership in various sectors, including e-commerce, cloud computing, and advertising, investors may see it as a promising opportunity for further investments. (finance, money, investing)