Microsoft or Alphabet: The next trillion-dollar company

Last week Amazon briefly joined Apple in this elite club. Who will be next?

David Brenchley 10 September, 2018 | 5:00PM
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The two largest companies in the world recently became the first corporations to reach valuations in excess of US$ 1 trillion. Last week,  Apple (AAPLbecame the first to hit the milestone, currently with a market capitalization of US$ 1.1 trillion.

On Tuesday last week,  Amazon.com (AMZN) became the second in the elite club, only to leave it shortly afterwards as the stock pared back later that day. As of Friday, its market cap hovered around US$ 950 billion.

Robin Geffen, founder and chief executive of UK-based Neptune Investment Management, expressed his surprise it took Amazon so long to reach the milestone. It won't be long before Jeff Bezos's behemoth permanently joins Apple.

So, how long until this duo becomes a trio -- or more? There are a couple of U.S. stocks that don't have too far to go, while two others are halfway there. We profile those next in line for 12-figure valuations.

Microsoft: US$830 billion
 Microsoft (MSFT) was first listed on the NASDAQ exchange on March 13, 1986, at a modest US$21, valuing the profitable tech firm at just over US$500 million. An investment then of U$10,000 would now be worth almost US$17 million.

The firm is a leading player in cloud technology thanks to its Azure platform and saw revenues rise 17% in the previous quarter, year-on-year, to US$30 billion. In its last full year, it generated US$110 billion in sales

The stock is up around 20% since early April to trade at US$108 currently. It needs a further 20% rise to around US$130 in order to break through the US$1 trillion barrier.

Morningstar analyst Andrew Lange values the firm at around US$940 billion, with a fair value estimate of US$122 on the stock. Microsoft began paying a quarterly dividend in 2005 and, since that time, it has increased the payout every year bar one, 2010, meaning it's a key player in U.S. and Global equity income funds.

Alphabet: US$810 billion
Not far behind Microsoft is  Alphabet (GOOG), the holding company for search giant Google. In fact, some reports at the time suggested the pair had looked into a merger shortly before Google went public on Aug. 19, 2004.

Google's initial public offering was priced at US$85, giving it a valuation of around US$23billion. In the 10 years since, the share price has grown 12-fold to US$1,199; a $10,000 initial investment would now be worth nearly a quarter of a million dollars.

In order for the firm to hit the US$1 trillion mark, shares need to advance 18% to around US$1,420.

The world leader in online search, with market share above 80%, the firm generates strong revenue growth and cash flow, with its video streaming website YouTube set to contribute more and more to the top and bottom lines over the coming years.

Morningstar analyst Ali Mogharabi has a fair value estimate of US$1,300 on the company, valuing it at US$915 billion.

The underdogs

Warren Buffett's conglomerate Berkshire Hathaway (BRK.B) is the only other listed entity that is valued in excess of half a trillion, at US$530 billion currently.

Facebook (FB) has had a tough year and has slipped below the half a trillion mark to trade at US$470 billion today. Still, plenty of fund managers are sticking with the social media giant.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alphabet Inc Class C183.39 USD2.23Rating
Amazon.com Inc183.49 USD0.20Rating
Apple Inc223.55 USD-0.34Rating
Microsoft Corp441.05 USD0.90Rating

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David Brenchley

David Brenchley  

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