Johannesburg - The Market capitalisation of Jeff Bezos’s Amazon is set to breach the $1trillion (R11.82trln) mark within the next two years as the group’s “flywheel” business model gains further steam.
Daniel Ives, the head of technology research at GBH Insights, yesterday told Business Report that Amazon had a unique opportunity to double down on its consumer and enterprise initiatives for 2018 and drive significant cash flow for the coming years.
“We believe Amazon will hit a trillion-dollar market cap over the next 12 to 18 months as the company’s consumer flywheel, further monetisation of the international market opportunity, and sum of the parts valuation is golden trifecta to get there. Bezos has built an iron fortress around the consumer with showing no signs of slowing down in 2018 and beyond,” Ives said.
Bezos last week leapfrogged Bill Gates as the richest person in the world after his wealth doubled to more than $110billion on the back of the Amazon stock surge.
The group, which is the second-largest private employer in the US, with 541900 people, saw its stock hit $1000 in May last year and finished 2017 at $1169.47, up 56percent on the year.
On track
Ives said his firm had raised the group’s price target from $1500 to $1850, adding that Amazon was on track to comprise 50 percent of all US e-commerce spending by 2019, up from 44 percent in 2017.
The company’s market capitalisation has also risen from $114bn in 2012 to more than $760bn yesterday.
Amazon is renowned for performing exceptionally efficiently measured against revenue per visitor, which is one of the key measures for any commercial website. Amazon’s cloud computing business run by Amazon web services (AWS) has made great strides in recent quarters.
AWS gave Amazon $5.1bn in revenue in the fourth quarter of last and raked in $17.4bn in 2017 as a whole, up from $12.2bn in 2016. AWS has grown in leaps and bounds over the past few years. In the fourth quarter of 2014, AWS contributed almost 5percent of Amazon’s revenue, while this jumped to 8.5percent in the fourth quarter of 2017.
The group last month also overtook Google as the world’s most valuable brand. The Brand Finance Global 500 valued the e-commerce giant’s brand value at $150.8bn, an increase of 42percent compared with 2017.
Apple defended its second place in the ranking, with brand value rebounding to $146.3bn after the 27percent decline last year.
Google dropped from first to third position, recording a relatively slow brand value growth of 10percent to $120.9bn.
Brand Finance noted that for the first time since the inception of its Global 500 study, technology brands claimed all top five places in the league table. Samsung was ranked fourth with a brand value of $92.3bn and Facebook took the fifth position with its brand valued at $89.7bn.
The Google-owned YouTube more than doubled its brand value to $25.9bn, jumping 70 places to 42nd.
The list also saw Chinese technology brand boast high brand value growth, with Alibaba ranked number 12, Tencent taking the 21st position, growing its brand 83percent to $40bn. Another Chinese company featured in the top 50 was WeChat with a brand value of $22.4bn.
Asief Mohamed, the chief investment officer at Aeon Investment Management, said the attraction of Amazon, Apple, Alphabet, Tencent and Facebook to investors were returns that were consistently above average.
Mohamed said invested capital that these companies have achieved would most likely increase in the future. “These companies generate strong cash flows and require very little capital investment in expensive infrastructure,” he said.