Amazon closes in on US$1 trillion with Morgan Stanley’s blessing

Rolls of Prime labels sit on a workstation at the company’s fulfilment centre in Kenosha, Wisconsin, US. (Bloomberg pic)

LONDON: Inc. is headed for its biggest gain in four months, pulling within US$26 billion of becoming America’s second trillion-dollar company, after Morgan Stanley said sales growth remains strong.

The rally extends a run in which Jeff Bezos’ online superstore has surged almost 550% since the end of 2014, adding roughly US$800 billion to its market value. Apple became the first US company with a 13-digit capitalization this month, crossing over for the first time on Aug 2.

Morgan Stanley lifted its price targets on Amazon and FAANG peer Alphabet Inc. by 35% and 14% respectively on Wednesday, to the highest levels among analysts surveyed by Bloomberg. Investors took notice, sending Amazon up as much as 3.4% and Alphabet up as much as 1.7%.

Amazon closed at US$1,998.10, rising for a fourth straight day. Up 71% in 2018, it’s the fifth-best performer in the S&P 500 this year.

Amazon’s high-margin revenue from advertising, cloud and subscription services like Prime are growing at such a rapid pace that the Seattle-based firm’s profits should increase even further, analyst Brian Nowak wrote in a note to clients earlier. Meanwhile, Google parent Alphabet is only in the early stages of monetising its seven platforms with more than a billion users. The launch of a ride-hailing service by Alphabet’s self-driving technology unit Waymo could also spur further share gains, Nowak said.

Both companies had already garnered a slew of price target increases after surpassing expectations for second-quarter earnings last month, and not a single analyst tracked by Bloomberg recommends selling either stock.

Amazon’s stock price has doubled over the past 12 months, trailing only Align Technology Inc., the maker of Invisalign orthodontics equipment, and Netflix Inc. in terms of percentage gains for a Nasdaq 100 index member. Alphabet has rallied about 35%, a bit ahead of the benchmark.