According to the news report by MarketWatch, Amazon.com Inc.’s stocks rallied during Monday’s trading to oust Microsoft as the most valuable public American company in terms of market capitalization. The company’s share shot up by 3.4% to close the trading day at $1,629.51 per share. Amazon’s market capitalization is now at $796.78 billion.
In comparison, Microsoft Corp. saw its shares go up by just 0.1% to close the trading day at $102.06 per share, with a market value of $783.57 billion.
In November 2018, Microsoft had overtaken Apple Inc. as the most valuable American company. However, since the new year, according to data from Dow Jones, Amazon has seen a stock rally of more than 11%, pushing it up from fourth place to first, and adding $74.1 billion in market capitalization.
Apple Inc., which had once crossed the $1 trillion mark in market capitalization, is now down to 4th place. The iPhone maker lost another 0.2% in share price in trading on Monday and currently has a market value of $701.99 billion.
Alphabet Inc., the parent company of Google, kept its third position with a market value of $745.63 billion, despite a 0.2% decline in its share price on Monday.
CNBC did a more in-depth analysis of why Amazon has now taken the number one spot as the most valuable public company in the world. According to CNBC, it has not been an easy road for Amazon.
Amazon’s market capitalization, like Apple’s, crossed the $1 trillion mark for a brief period in September last year. However, thanks to a sharp decline in the stock market towards the second half of last year, the company faced one of its worst quarters in terms of share price since the 2008 market crash.
However, the company’s stocks have managed to rally in the first week of the new year, thanks to which the company’s is now number one.
While there are many reasons why investors are still bullish about Amazon’s stocks, despite an overall slowdown in the technology sector. One of the biggest reasons, however, is the continued opportunity for expansion.
Another reason is Amazon’s cloud computing business. Amazon Web Services (AWS) remains the industry’s juggernaut and continues to grow exponentially. Annual revenue is now beyond $23 billion and the company controls over 40% of market share. In the most recent quarter, AWS’s revenue grew to $17.8 billion, which is up by $16 billion from the second quarter. And the second quarter results were $12.4 billion higher than the first quarter results.
Amazon’s core business, online retail, accounted for more than 90% of the company’s overall revenue. The e-commerce business also accounted for more than 50% of all online sales in the United States for 2018.
Within its e-commerce business, Amazon’s third-party marketplace has become a key component to its success. The marketplace made up 31.3% of all sales for 2018 in the US. This is a 35.6% increase from 2017, according to data from eMarketer.
Despite such massive number, Amazon owns just about 5% of total US retail sales – both online as well as physical store sales. Amazon has also been strongly investing in emerging markets such as India, and is making ingress into brick-and-mortar retail sales through acquisitions such as Whole Foods.
According to Pivotal Research Group analyst Brian Wieser, despite Amazon’s size, the company still has room to grow thanks to consumer as well as IT department spending. Wieser has given Amazon a “buy” rating with a share price target of $1,920 per share, which is at an 18% premium of the company’s current share price.