In early August last year Amazon lost out to Apple in the race to become the world’s first $1 trillion company. At the time, many analysts and stock market observers, including this writer, were quick to forecast that while Amazon may have lost that leg of the race the company would inevitably overhaul its FAANG peer as the most valuable company in the world. Amazon’s more broadly based revenue streams, across online and now bricks-and-mortar retail, its quickly growing cloud computing utility AWS, and Amazon Prime streaming service always looked more sustainable than Apple’s reliance on the iPhone in a smartphone market seemingly nearing maturity.
And that has proven to be the case. Microsoft made a surge to overtake both Apple and Amazon’s market capitalisation on the back of the software giant’s successful transition of its dominant Microsoft Office home and workplace software suite into a SaaS model. That move up the valuation rankings was boosted by a significant sell-off of the tech sector that hit the ‘high growth’ FAANG stocks hardest. The more mature Microsoft took advantage.
But of the FAANG stocks, whose fortunes are now diverging, Amazon and Alphabet (Google’s parent) have weathered the storm best. And yesterday, following a 3% gain for Amazon’s share price, the company overtook Microsoft’s market capitalisation to finally take the crown of the world’s most valuable company.
With a market capitalisation currently sitting at just shy of $797 billion, Amazon’s valuation is currently significantly off its September 4th 2018 peak of comfortably over $1 trillion, when its share price closed at $2039.51. Yesterday’s closing price of $1629.51 is 20% down on that but under present market conditions is enough to propel Amazon’s valuation to the top of the international league table. And few will doubt that when market sentiment cheers up a little, Amazon will again surge past the $1 trillion level.
Given the recent change in investors attitude towards the aggressive valuations of big tech, that might take longer than would probably have been the case this time last year, potentially significantly, but Amazon’s growth trajectory looks strong. If bets were to be made on the first company to hit a $2 trillion valuation, the odds on it being Amazon would certainly be the shortest on offer.
Apple’s reign appears to be over, at least for the foreseeable future. The iPhone maker has dropped into 4th place, behind both Microsoft and Alphabet. An early January profit warning that blamed a drop-off in Chinese sales that has deepened well beyond what the company foresaw, has seen Apple investors take fright at future growth prospects.
With Microsoft and Alphabet’s current market capitalisations of $783.6 billion and $745.6 billion respectively positioning them just behind Amazon, the company that started out in 1994 as an online bookshop will still be looking over its shoulder until it can put some clear daylight between itself and the chasing pack. But for now, Amazon rules the roost as the world’s most valuable company while the deposed Apple looks to shore up its breaches and chart a new path. The king is dead, long live the king!
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