The race to one trillion

It’s looking as though 2018 could see a business first – it is possible that we could see a US company valued at $1 trillion. Currently, we have five US tech companies valued at over $500 billion and, if technology shares prices continue to rise as they did in 2017, it is feasible that any of them could pass the trillion-dollar threshold. Who are the runners and riders, and who is the best-placed to succeed?

Apple only needs a 15% increase in its share price…

The smart money favours Apple – it currently has a market value of $899 billion, and experts believe the peak of its success is still a long way off. It made profits of $48 billion in the last financial year, and would only require a 15% increase in share price to cross the threshold (last year, they rose by 47%). David Rolfe, the chief investment officer at Wedgewood Partners, compares the company’s dominance in such a large business – Apple claims 80% of gross profit across the smartphone industry. Despite a little blip in PR after it was revealed the company slows down old iPhones, a release schedule full of new iPhones, a smart speaker, iPads, watches, MacBooks and much more will likely see Apple in good stead throughout 2018.

Amazon could hit $1 trillion by the end of the year…

Their next closest rival is Alphabet, the parent company of Google (currently at $771 billion). Some experts are predicting that Alphabet will take the crown, believing that 2018 Apple products look to be overpriced and will fail to capture public attention in the way previous products have done. Microsoft ($664 billion), Amazon ($566 billion) and Facebook ($520 billion) round out the top five competitors.

Barclays thinks that Amazon is a strong contender for the crown of the first US trillion-dollar business – its stock price increased by 58% last year, and its shares are trending at a record high of more than $887 a share (other analysts back up this judgement because of the company’s incredible growth). Its profits increased to $2.4 billion on sales of around $136 billion and, at that rate, it would hit a trillion in just over two years. Its incredible success already turned founder and chief executive Jeff Bezos into the world’s richest man, with a net worth of $99 billion.

Facebook’s portfolio looks to be a strong source of growth…

Morgan Stanley agrees with this judgement, but predicts that Amazon will manage the feat by the end of the year. They’ve broken down different parts of Amazon’s business, noting that it has several billion-dollar alongside its main shopping service (things like Amazon Web, which at values at $270 billion, and Prime, at $70 billion), and it predicts that share prices could hit $2,000 within the next 12 months.

Microsoft was struggling five years ago after the lacklustre performance of Windows 8 and concerns over the smartphone market and cloud computing – now, it would have to gain another 50% to reach the US trillion-dollar market. It would be difficult but not unachievable, with experts positing Microsoft’s cloud and subscription businesses as the likeliest sources of this money. Facebook too has seen a bit of a stumble with worries over its efforts to combat fake news, but a diversified portfolio of platforms (including WhatsApp and Instagram) look to be strong sources of growth.

It is only a question of when, rather than if…

Let’s look at a very dark horse to finish. Elon Musk has been promoting Tesla to investors, telling them that his company’s acquisition of SolarCity was a good decision because it would lead to the business reaching $1 trillion. Tesla would need its share price to grow 2,122% from its current market value of $45 billion, but Musk has a good record of predicting his company’s trajectory – perhaps this business will show everybody up.

No matter who wins, there’s one thing that all experts agree on – the US trillion-dollar tech company now is only a question of when, rather than if. These companies all look to see their values rise past $1 trillion, given time and sufficiently strong financial years – I fully expect that 2018 will be the year that one of them makes history.

 

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