Illustration: Rebecca Zisser/Axios
What's worth more — a company that sells $250 billion of stuff every year at a profit margin of 22%, or a company that sells $200 billion of stuff every year at a profit margin of 3%?
The answer: It's surprisingly close. Both Apple and Amazon now have a stock-market valuation of $1 trillion. The Apple valuation makes a lot of sense: If anything, the iPhone maker is undervalued by the standards of the stock market as a whole. But Amazon is another story entirely: each dollar of profit it makes is valued by the market at an eye-popping $208.
The bottom line: It's almost impossible to justify a $1 trillion valuation if you're trying to get there the old-fashioned way, by looking at the present value of future cashflows. And it's certainly impossible to justify it by looking at Amazon's takeover value, since no one on earth is big enough to buy it.
What's next? The $1 trillion milestone is a real one, and now that Amazon has broken it, the sky's the limit for its stock, which Morgan Stanley sees rising another 25% to $2,500 per share. In today's winner-takes-all economy, big companies can grow faster than startups, and valuations are merely psychological obstacles on the road to ever-higher share prices. Never mind the cashflows, just look at all the wealth being created.