Apple and Amazon are both flirting with one trillion dollar valuation. Apple deserves it. Amazon doesn’t, at least not yet.
A trillion dollars may sound too big a valuation for a single company. It is roughly 5% of the American GDP.
That sounds scary for some investors who have been on Wall Street long enough to have seen bubbles blowing and bursting.
But that may not be the case if the company is Apple, with $285 billion dollars in annual sales, $88 billion in profits, and $71 billion in cash. These are impressive numbers, and can justify the company’s non-stop gains and hefty market capitalization.
At $1.09 trillion, Apple is valued roughly 3.80 times annual revenue, 12.40 times gross earnings, and fifteen times total cash–Table 1.
Apple vs Amazon Market Cap vs Sales, Earnings, and Cash
|Company||Market Cap||Market Cap/Revenue||Market Cap/Gross Earnings||Market Cap/Cash|
Source: Calculated from Finance.yahoo.com 9/13/2018
And things look bright for the company’s future, as it continues to churn out new products, and monetize the ID it assigns to its customers.
“Their ecosystem of product and services is a major stronghold for the company going forward,” says LIU Professor George Andreadis. “Even though the services sector is not at the same dollar value as their phone sales, the outlook for this sector and ecosystem will be a key growth component for Apple going forward.”
While Apple deserves one-trillion valuation, Amazon doesn’t, at least not yet. At $970 billion, Amazon is valued at 4.66 times sales, 14.70 times gross earnings, and 35.92 times cash–Table 1. And valuations would look even more hefty if Apple’s valuation of $1.09 trillion was applied to calculations. This means that Apple is a better investment than Amazon.
That’s why investors should be very cautious in placing more bets on Amazon at these valuation levels.