Nov 14, 2017

Amazon could soon be a $1 trillion company

Amazon CEO Jeff Bezos. Photo: Ted S. Warren / AP

Amazon could soon have a $1 trillion valuation, according to Morgan Stanley analyst Brian Nowak, who broke down the calculations in this best-case scenario in a research note to clients this week.

How Amazon could double in value: Investors already prize Amazon highly relative to its typically meager quarterly profits, but Nowak argues that Amazon can increase its retail profit margins from less than 2% today to 5.5% by 2022.

Nowak says Amazon could achieve these margins by investing the healthy profits from its high-margin cloud, advertising, and Prime subscription businesses back into core retail operations, creating efficiencies that increase margins without having to raise prices.

Nowak sees cloud, advertising, and Prime subscription business lines, and not the core retail business for which Amazon is best known, driving Amazon's growth in the near term. His best-case scenario shows these businesses growing at an annual rate of 32% through 2020, and comprising 40% of Amazon's $1 trillion market cap by 2022.

Update: This post originally stated that Amazon could be the first company to a $1 trillion valuation, but Apple is more likely to reach that mark first.

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Situational awareness

Photo: Drew Angerer/Getty Images

Catch up on today's biggest news:

  1. Scoop: New White House personnel chief tells Cabinet liaisons to target Never Trumpers
  2. Trump misrepresents 2020 Russia briefing as Democratic "misinformation"
  3. Bernie Sanders takes aim at Bloomberg: "Trump will chew him up and spit him out"
  4. Nearly half of Republicans support pardoning Roger Stone
  5. Scoop: Lyft acquires cartop advertising startup Halo Cars

Sanders takes aim at Bloomberg: "Trump will chew him up and spit him out"

Photo: Mario Tama/Getty Images

Bernie Sanders told CBS "60 Minutes" that he was surprised by Mike Bloomberg's lackluster performance at Wednesday's Democratic debate.

What he's saying: "If that's what happened in a Democratic debate, you know, I think it's quite likely that Trump will chew him up and spit him out."

Scoop: Lyft acquires cartop advertising startup Halo Cars

Photo: Drew Angerer/Getty Images

Lyft has acquired Halo Cars, a small startup that lets ride-hailing drivers earn money via ad displays mounted atop their cars. Lyft confirmed the deal but declined to share any details.

Why it matters: Ride-hailing companies are increasingly eyeing additional ways to generate revenue, and Lyft rival Uber has been quietly testing a partnership with New York-based Cargo that gives it a cut of the advertising revenue, as I previously reported.