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Amazon Will Be the First Trillion-Dollar Company, Not Apple

Luke Lango

A few months ago, Apple (NASDAQ:AAPL) stock was soaring, and everyone was talking about the elusive trillion-dollar mark. For the first time ever, it finally looked like the stock market was about have its first trillion-dollar company.

But, that’s old news. At current stock price appreciation rates, we will have not one, but two trillion-dollar stocks by Halloween 2018. And Apple won’t be the first company to get there.

Instead, if you extrapolate out trailing 12-month performance, Amazon (NASDAQ:AMZN) will be the first company to the trillion-dollar mark. By my calculations, past performance indicates that AMZN stock should cross that threshold by early October.

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Granted, history is no perfect indicator of the future. But, the fundamentals also line up for AMZN stock to pass the trillion-dollar mark soon. And the fundamentals also say that AMZN stock could get there much more quickly than October.

Here’s a deeper look.

History Says We Will Have Two Trillion-Dollar Companies by Halloween

Any rational individual will tell you that history is no clear indicator of the future. But, any rational investor will tell you that, when it comes to stocks, momentum is a very real thing.

Thus, looking to the past to get an idea of where things are headed in the future isn’t such a bad idea, especially when we are talking about two stocks that have had great momentum.

Over the past year, AAPL stock is up roughly 29%, while AMZN stock is up 77%. Including non-trading days, that equates to a compounded daily average growth rate of 0.07% for AAPL stock and 0.16% for AMZN stock.

Apple’s market cap is presently $940 billion. Amazon’s market cap is right around $880 billion.

If you assume that these stocks continue to perform over the next several months as they have over the past year (0.16% gains per day for AMZN and 0.07% gains per day for AAPL), then AMZN stock should pass the trillion-dollar mark by early October. AAPL stock should pass $1 trillion shortly thereafter in the middle of October.

Thus, if both of these stocks maintain their present momentum, we will have two trillion-dollar stocks by Halloween.

Amazon Stock Could Get There Sooner

The fundamentals imply that AMZN stock could get to a trillion-dollar market cap sooner than early October.

Amazon earnings are right around the corner (Jul. 26), and AMZN stock tends to rally in a big way on good numbers. With respect to the company’s last four earnings reports, AMZN stock has risen in response to three of them.

With respect to those three positive earnings reports (which also happen to be the three most recent earnings reports), the average gain for AMZN stock the next day was 6.6%. Also, the options market is pricing in a 5%-plus move higher or lower in AMZN stock after earnings.

Putting it all together, AMZN stock should head higher by roughly 5-7% on Jul. 27 in the event that earnings are good.

I think those earnings will be quite good. All signs point to Amazon gaining share in the e-commerce world, as Prime day was a huge success despite worker strikers and website glitches. Moreover, Prime Day incorporated Whole Foods for the first time ever, and that is a monumental move. Beyond commerce, Amazon Web Services continues to dominate the cloud world.

Altogether, the Amazon growth machine remains as strong as ever, and as such, Amazon’s quarterly numbers should be quite good. That will likely send AMZN stock roughly 6% higher on Jul. 27.

Assuming Amazon’s market cap stabilizes around $880 billion until Jul. 26, jumps by 6% on Jul. 27, and then rises by the steady run-rate of 0.16% per day thereafter, Amazon could pass the trillion-dollar market cap as soon as early September.

Bottom Line on AMZN Stock

This is a big-time winner. And the winning streak won’t stop soon.

Assuming the stock pops on earnings and then maintains its present momentum, Amazon could become the stock market’s first trillion-dollar company by early September.

As of this writing, Luke Lango was long AAPL and AMZN.

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