Bull Case Sees Amazon.com, Inc. (AMZN) Reaching Market Cap of $1 Trillion Within a Year

Amazon.com, Inc. (NASDAQ:AMZN) may achieve $1 trillion in market capitalization sooner than anticipated after all, according to a Morgan Stanley report.

The e-commerce giant will have as much profit generated by its new segments in about five years as it does in retail sales now, and this could raise its valuation to $2,000 per share, or $1 trillion in market capitalization, by the end of next year, Morgan Stanley analyst Brian Nowak wrote.  Amazon’s market capitalization is hovering at around $544 billion at present.  Nowak applied a “sum of the parts” methodology, which looks out to 2022 for Amazon’s AWS, advertising, first-party, third-party and subscription business lines.  Amazon Web Services alone was assigned a $270 billion valuation, with a 50 percent EBITDA margin and annual sales growing 18 percent.

TheStreet’s Jim Cramer didn’t seem to agree with the assessment as it was too low.  He believes AWS is a “gem” and that it is “dramatically undervalued”.  Amazon’s ad and subscription businesses, meanwhile, were given valuations of $55 billion and $70 billion, respectively.  The company’s core retail business would be worth $600 billion, with e-commerce notching yearly sales growth of 13 percent in 2022, according to the analyst.

Despite this optimistic outlook, Nowak reiterated an overweight rating for Amazon with a price target of $1,250 on its shares.  Nowak wasn’t the first to flag a trillion-dollar valuation for Amazon.  In October, former stock analyst and now professor Scott Galloway said Amazon will become the first trillion dollar company in the world.  “Amazon has replaced profits with vision and growth,” he said in an interview with TheStreet.  Galloway also expects Amazon to target luxury department store chain Nordstrom Inc. (NYSE:JWN) and potentially some broadcast networks following its blockbuster takeover of Whole Foods Inc. earlier this year.  MKM Partners’ Rob Sanderson also suggested in September that Amazon could be worth approximately $1.6 trillion by around 2025, driven by its e-commerce and cloud computing businesses.

Amazon In Australia

The valuation outlook came as Amazon was reportedly preparing to launch in Australia.  According to emails seen by CNET, the e-commerce giant is contacting sellers to get them prepared to sell by “mid-November”.  Two sources with knowledge of the plans also confirmed that Amazon was working to launch by Black Friday, although the exact date has yet to be established.  As part of its launch bid, the company has been actively engaging merchants from both Australia and the U.S. to help fill its online depot.

Amazon ended the latest trading session up 0.34 percent to $1,129.17 per share. The stock is up 50 percent to date through November 10.