Over the last five years, the FANG stocks + Apple are up over 500% and 200% in the last three years. Apple was the first company to reach the $700 billion, $800 billion, and the $900 billion market cap mark. CEO Jeff Bezos is now the world’s richest man, with a personal wealth of over $100 billion. Based on these two amazing feats, the only two real contenders for the 1st company to reach the one trillion dollar market cap are Apple and Amazon.
However, lets talk about the honorable mentions since they are a part of FANG and in their own right have had one hell of a run the last several years as well.
Facebook has seen its stock rise from $42 during the IPO in 2014 to a high or $192.94 as of yesterday. But with a market cap of $558 billion, the stock price would have to rise to $345 in order to reach a one trillion market cap. It ain’t happening anytime soon.
Many years ago, I bought some put options and made some profits on Netlfix. Next thing I knew, Carl Icahn made the headlines when it bought Netflix in Oct of 2012…I call it the Icahn bounce. Netflix’s stock price went on a tear and rose from $12 to $365 in a little less than 6 years. But with a market cap of $159 billion, the stock price would have to rise to $2295. It ain’t happening anytime soon.
I remember when Google went public in 2004. I told my cousin, I’m not buying a stock for $85. I have to laugh because that $85 has now seen a more than 17X return. Google has a printing money machine in its Google Search to pour money into the latest technological advances. But with a market cap of $784 billion the stock price would have to rise from $1151 to $1448. Google has averaged 23 percent year-over-year growth for 33 quarters, or more than eight years, according to RBC Capital, so it’s hard to count them out of the race. And although they are at the forefront of AI, AI is still too new for Google to be a real threat in reaching the market cap of $1 trillion first.
This brings us back to Apple and Amazon. Which one of these companies will reach the $1 trillion market cap first?
$100 invested in Amazon’s IPO would be worth over $100, 0000 today. Originally the company was registered as Cadabra, but a lawyer misheard it and said, "cadaver?" Jeff Bezos then came up with the name Relentless.com. People thought it sounded a little sinister, but Bezos liked it so much that he still bought the URL and to this day Relentless.com redirects to Amazon.com
Try it, it really works Relentless.com
Bezos settled on Amazon so that it would appear early in alphabetic order and "Amazon" was the river he considered the biggest in the world, as he hoped his company would be one day. Yes, Amazon is relentless and big, but its main revenue stream comes from Amazon Web Service (AWS), its cloud base service. AWS sales have gain 48% in the last 12 months and this is expected to continue in the years to come. However, AWS’s operating income equates to more than 60% of the operating income for the entire company. I don’t think this is enough to getting the job done in being the 1st trillion dollar market cap company. Amazon’s stock price would have to rise from $1696 to $2061. A very realistic milestone, but I don’t think it gets there before Apple.
I believe Apple will be the clear winner of the 1st company with a $1 trillion market cap. Since 2013, Apple has shrunk it shares outstanding from 6.6 billion shares to a little 5.0 billion shares. Higher earnings mean a lower P/E, which means a lower valuation relative to other companies, which means attractive to investors. Companies that consistently buy back their shares can grow EPS at a substantially faster rate than would be possible through operational improvements alone.
Apple is the biggest company in the Standard & Poor 500, the Nasdaq 100 and the Dow Jones Industrial average. With the introduction of index funds in the 1970s with the goal of achieving returns in line with the Market and introduction of ETFs in the 1990s that track major indices, any flow of money into these EFTs, means Apple shares are being bought.
However, I think the real edge Apple has over Amazon is the Buffett Affect. In early March, Warren Buffett announced he bought an additional 75 million shares in Apple. Buffett later went on CNBC and stated he wanted to buy the entire company….LOL. Also, there are fund managers that mimic every move Buffett takes, this means millions of more shares were purchased that week by those managers. The chart below shows what happens to the stock price when Buffett buys Apple stock.
Since the announcement at the beginning of May, Buffett has not only lifted the Markets, but Apple’s stock price has risen from 176 to 193 or 10% and only has $10 to reach $1 trillion market cap.
So what do you think, who do you think will be the 1st trillion dollar market cap company?
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.