The trillion-dollar club, which includes the five stocks with a market capitalization of more than $1 trillion, is made up of Apple, Microsoft, Amazon, Alphabet’s parent company Google, and Facebook, the club’s newest member.
On Monday, Facebook shares rose more than 4% in response to a court decision dismissing both federal and state antitrust complaints filed against the social media giant. The stock’s surge increased the social media company’s market value to more than $1 trillion.
Analysts searched for Wall Street analysts’ predictions for the five companies over the next year. According to FactSet, based on average 12-month price targets, Amazon is expected to rally the most, with an average upside of 24 percent, bringing the e-commerce giant’s market valuation to $2.22 trillion in the next year.
Amazon is expected to nearly overtake software behemoth Microsoft, which is expected to be worth $2.27 trillion in a year’s time.
Amazon, a major beneficiary of the pandemic, saw a 44 percent increase in sales in the first quarter. Earnings and revenue also exceeded analyst expectations.
“We believe Amazon is well positioned as the market leader in e-commerce and public cloud, where the secular shifts are still early,” JPMorgan equity analyst Doug Anmuth wrote in a recent note to clients. “We believe Amazon’s flexibility in pushing first-party vs. third-party inventory, as well as its Prime offering, both serve as significant advantages in its retail business, and its multi-year foray into the cloud has resulted in a 40 percent+ AWS global market share.”
Anmuth also stated that Amazon is beginning to show signs of profit, with its fast-growing AWS and Advertising revenue streams also being its most profitable.
Wall Street expects Apple to maintain its top spot and gain nearly 17 percent in the next 12 months, bringing the Tim Cook-led tech behemoth to a market capitalization of $2.67 trillion.
Apple reported a record-breaking first quarter, with company-wide sales up 54% year on year and profits significantly higher than Wall Street expected.
“We believe the current valuation represents a good long-term buying opportunity,” said Huberty, who rates Apple as outperform.
Google is worth $2 trillion.
Alphabet, Alphabet’s parent company, is expected to rise nearly 14 percent in the next 12 months to a market capitalization of nearly $2 trillion.
“Along with Facebook, Apple, Amazon, and Microsoft, we see Alphabet as one of the tech industry’s leaders,” Argus analyst Joseph Bonner told clients. “These firms have come to dominate new developments in mobile, public cloud, and big data analytics, as well as emerging areas like artificial intelligence and virtual/augmented reality.”
According to Bonner, while Alphabet is facing antitrust investigations in the United States and around the world, the cases will take years to play out in court and may be difficult to prove. According to Argus, new legislation, while a threat, may face difficulties in a divided U.S. Congress.
The most notable example is Google’s rapid recovery from a Covid-19-induced advertising slump. Alphabet easily outperformed expectations in terms of earnings and revenue in the first quarter, and YouTube’s advertising business performed well.
“We see continued momentum as e-commerce and digital advertising have exploded in tandem with the economic recovery,” Bonner said. “In light of the company’s rapidly expanding businesses, GOOGL shares appear to be attractively valued.”
New member adoration
According to FactSet’s collection of analyst forecasts, Facebook’s market capitalization is expected to rise by about 9% over the next year to $1.14 trillion.
In the first quarter, Facebook outperformed in terms of both earnings and revenue. According to the company, revenue has increased by 48 percent since last year due to higher-priced advertisements. Facebook attributed its massive revenue growth to a 30% increase in the average price per ad and a 12% increase in the number of ads shown.
Facebook derives nearly all of its revenue from personalized advertisements displayed to Facebook and Instagram users. The company also has a thriving hardware business, where it is developing products such as the Portal video-calling device, Oculus virtual-reality headsets, and smart glasses, all of which are scheduled for release in 2021.
Facebook went public in May 2012, with a market capitalization of $104 billion.