Forget Apple and its $1 trillion market capitalization. The way MKM Partners sees it, Amazon.com could hit $2.5 trillion in market cap by 2024.
According to a report in CNBC, citing MKM Analyst Rob Sanderson, thanks to the company’s profitable cloud computing unit, Amazon Web Services (AWS), the company could see its value explode. The analyst said in a research note to clients that AWS may be worth $1 trillion in six years, which would be larger than Amazon’s market cap, which currently stands at $929 billion.
Earlier in August, Apple became the first U.S. company to pass the $1 trillion market cap threshold.
“We still think that AMZN is the best long-term growth investment available to investors today,” Sanderson wrote, according to CNBC. He upped his 12-month price target on the stock to $2,215 from $1,840. On top of margins improving at Amazon Web Services, the analyst said the company’s fulfillment operations should have better profitability, and that Amazon’s fresh food delivery service should increase as well. By 2025, Sanderson thinks Amazon will be in control of 14.5 percent of the retail market in the U.S, which would make it larger than Walmart.
The analyst believes AWS will have operating margins of 35 percent in 2024, up from 26.9 percent in the second quarter of this year. By 2025, the unit will account for close to 32 percent of its $88 billion of profits, he said in the note.
Earlier this month, Piper Jaffray predicted that in three years’ time, advertising will bring in more revenue for Amazon. According to a report in CNBC, Piper Jaffray Analyst Michael Olson said that Wall Street is focused on AWS, but that new segments – including advertising – will be a driver of revenue growth in the future.
“By 2021, we believe it is likely that advertising operating income will exceed AWS … investors should be focused on Amazon advertising now; this is a major driver to results and valuation today, and continuing in the coming quarters and years,” wrote Olson. The analyst has a $2,100 price target on Amazon.