Amazon President, Chairman and CEO Jeff Bezos speaks at the Business Insider's

  • Amazon is racing to become one of the world’s first $1 trillion companies, with Apple currently poised to take the crown in the next few months.
  • Apple is currently the world’s most valuable company by market cap, but Morgan Stanley predicted that Amazon’s multiple high-margin businesses could help its share price up to $4000 by the end of next year.
  • Amazon makes the bulk of its money from retail, but its cloud business, advertising arm, and Prime subscriptions are all becoming increasingly valuable.

Amazon be worth $1 trillion (£763 billion) by the end of 2018, according to a bullish calculation sent to investors by Morgan Stanley.

The bank also predicted the firm could hit a $2,000 (£1,526) share price in the next 12 months.

The major reason: Amazon has built several fast-growing businesses on top of its core, massive retail business. Specifically, there’s Amazon Web Services, advertising, and Prime subscriptions. All of these are fledgling compared to retail (though still pretty huge in their own right), which Morgan Stanley values at $600 billion.

“Amazon’s high margin [revenue] disclosure speaks to the $1trln ($2,000/sh) sum of parts bull case,” wrote analyst Brian Newark in the note, titled: “The math behind the trillion dollar bull case.”

Here’s how Morgan Stanley currently values different parts of Amazon’s business

  • Retail: $600 billion (£458 billion)
  • Amazon Web Services: $270 billion (£206 billion)
  • Prime subscriptions: $70 billion (£53.4 billion)
  • Advertising: $55 billion (£42 billion)
  • Total: $995 billion (£760 billion)

It’s already clear that Amazon has quietly built several multi-billion dollar businesses alongside its main shopping function. Morgan Stanley notes that all of these businesses offer high margins, leaving Amazon with lots of cash to reinvest in its business.

Amazon $1 trillion bull case slide

Newark estimated that Amazon’s $600 billion retail business would achieve a 13% annual sales growth Read More Here