Apple Inc. AAPL -1.59% may have gotten there first, but Amazon.com ’s AMZN -1.50% rapid ascent to a $1 trillion market value should put the iPhone maker on notice that its days as the world’s most valuable company are numbered.
On Tuesday, Amazon became the second U.S. company to reach a market value of $1 trillion. That happened barely a month after Apple crossed that threshold.
Amazon’s price didn’t hold that level for long during a rather rough day overall for stocks, but it is still notable how quickly the e-commerce giant has covered ground. At the start of the year, Amazon was worth about $566 billion while the iPhone maker was worth about $860 billion. That is a 77% jump for Amazon compared with Apple’s 16% rise. Put another way, the gap in market value between the two largest tech giants has narrowed from 34% to about 9% in eight months.
Amazon’s meteoric rise comes from the fact that it has harnessed its scale more effectively than even its Big Tech peers. Apple’s impressive growth over the past decade has come primarily from the iPhone. None of the other products the company has launched since have had anywhere near the same impact. Google also has logged significant growth since 2007 as it has ventured into many new areas, but its parent company Alphabet Inc. still relies on advertising for the majority of its revenue and profits.
Amazon, meanwhile, has managed to both significantly boost its already huge retail business while also building sizable new ventures in devices, media and advertising. The most notable of those ventures has been its cloud service which now accounts for more than 11% of total revenue and most of its operating profit.
As a result, Amazon’s revenue growth since 2007 has averaged 28% per year compared with 22% for Apple and 20% for Google. Amazon also has managed to fatten up its notoriously thin bottom line in the process. Operating income for the first six months of this year totaled $4.9 billion—triple that of the same period last year. Wall Street also expects Amazon to pass Apple in annual sales for calendar year 2019, according to analyst consensus figures compiled by FactSet.
This is one of those times when investors count all the money they could have made if only they had bought or not sold, but Amazon was no sure thing during its ascent and is still no low-risk bet. A market value of $1 trillion puts the stock a little over 100 times forward earnings compared with 17 times for Apple. Apple’s current multiple is the highest the stock has fetched since 2010, though, while Amazon’s has fallen by nearly 40% since the start of the year thanks to the company’s rising bottom line.
Amazon’s investors have never been terribly sensitive about valuation anyway. The company’s proven ability to keep delivering the goods has been well worth the price.
Appeared in the September 5, 2018, print edition as 'Apple Won’t Be Biggest for Long.'