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Apple is almost a US$1tril company, but watch out for Amazon


Apple is in danger of being pipped to the US$1tril company post by Amazon.com. — Dreamstime/TNS

Apple is in danger of being pipped to the US$1tril company post by Amazon.com. — Dreamstime/TNS

SAN FRANCISCO: Apple is on the verge of becoming the first US$1tril (RM3.94tril) publicly listed US company, but even if it gets there, it could soon be overtaken as Amazon.com surges from behind.

Started in the garage of co-founder Steve Jobs in 1976, the iPhone maker's annual revenue has ballooned to US$229bil (RM903.97bil), greater than the gross domestic product of countries including Portugal and New Zealand.

Apple's market capitalisation on May 10 topped a record US$934bil (RM3.68tril), following its unveiling last week of a US$100bil (RM394.75bil) buyback budget and news that Warren Buffett's Berkshire Hathaway dramatically increased its stake in the company.

Thanks to a 12% rally since its quarterly report last Tuesday, the Cupertino, California company is just 8% short of hitting the US$1tril (RM3.94tril) valuation mark.

Pointing to Apple's recent 31% jump in service revenue, including music streaming and online storage, CFRA analyst Angelo Zino on Wednesday upped his target price for the stock from US$195 (RM769) to US$210 (RM828), which would put Apple's market capitalisation at US$1.03tril (RM4.06tril). Zino joins at least 12 other analysts with price targets putting Apple's stock market value at 13 digits.

But Apple is in danger of being beaten to the US$1tril (RM3.94tril) mark – or passed soon after – by Amazon.com, the second largest listed US company by market value, at US$780bil (RM3.07tril).

Saudi Arabian authorities, meanwhile, have said they expect a planned international initial public offering of Saudi Aramco that would value the national oil producer at about US$2tril (RM7.89tril).

While US$148bil (RM584.08bil) smaller than Apple on May 11, Amazon of late has expanded its stock price, and its sales, much more quickly than Apple. Amazon's stock is red hot, trading recently at over 100 times expected earnings, compared to more-profitable – but slower growing – Apple's valuation of 15 times earnings.

Apple's stock has risen 24% over the past year, fuelled by optimism about the iPhone X, the company's latest smartphone. But demand for the US$1,000 (RM3,946) device has underwhelmed investors, and bulls are now focused on Apple's plan to return more cash to shareholders.

By comparison, Amazon's stock has surged 70% over the past 12 months, bolstered by 31% revenue growth as more shopping moves online and businesses shift their IT departments to the cloud, where Amazon Web Services leads the market.

Amazon is also competing more with Apple and Google owner Alphabet as it sells music and video content, its Fire TV device and its Alexa smart home gadget.

At US$765bil (RM3.01tril), Alphabet has the third largest market capitalisation on Wall Street, with Microsoft close behind at US$749bil (RM2.95tril). Amazon breezed past both them both in February.

Including Facebook, the five largest listed US companies now account for 15% of the S&P 500's US$24tril (RM94.71tril) market capitalisation.

To be sure, past stock gains are not a reliable predictor of future performance, and the surge in Apple's and Amazon's shares in recent years has been exceptional by most standards.

But if Apple's stock were to keep growing at the pace seen over the past year, the company's market capitalisation would hit US$1tril (RM3.94tril) in September. Amazon would reach US$1tril (RM3.94tril) around October if its stock price continued to rise at the same rate as the past year, and overtake Apple soon after.

Extending forward their own one-year performances, Microsoft would not reach US$1tril (RM3.94tril) until early 2019, and Alphabet would take until 2020.

Most Wall Street analysts are less optimistic. The mean analyst price target puts Apple's stock 6% above current levels at US$200 (RM789) within the next 12 months, which would elevate its market capitalisation to US$983bil (RM3.87tril), according to Thomson Reuters data.

The mean price target of analysts covering Amazon is US$1,850 (RM7,301), a 15% premium over its current price, which would give it a market value of US$898bil (RM3.54tril). Analysts target Microsoft to rise 12% to reach US$845bil (RM3.33tril), and for Alphabet's market value to increase 16% to US$884bil (RM3.48tril). — Reuters

   

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