At the closing bell on Thursday, the market cap for Amazon.com Inc. (NASDAQ: AMZN) was $422.1 billion and the company was the fourth-largest U.S.-listed firm. The third-largest company by market cap was Microsoft Corp. (NASDAQ: MSFT) with a valuation of $501.9 billion.
In a note to investors last week, Needham analyst Kerry Rice upgraded Amazon’s shares from Hold to Buy and set a price target of $1,100 on the stock. Amazon’s 52-week high is $923.72, a peak reached on April 5.
Based on Friday’s closing price of $884.67, Amazon’s stock would need to appreciate by 24% in order to reach $1,100. With its current 478 million shares outstanding, Amazon’s market cap would reach nearly $526 billion at $1,100 per share.
Microsoft’s market cap would need to rise more than 5% to stay ahead of Amazon’s. Both companies posted double-digit share price increases in the past 12 months, but Amazon’s increase of nearly 49% was more than double the nearly 20% increase in Microsoft’s stock price.
Share price growth at both companies has slowed in 2017: Amazon’s stock is up about 18% for the year to date while Microsoft’s stock trades up about 4.5%.
Needham’s Rice is cited at CNBC: “We believe Amazon’s established dominance in U.S. is sustainable with Prime, mobile penetration and third-party growth.” Rice expects Amazon to add 16% to its retail market share over the next five years, which would mean that the online behemoth would hold about 50% of all U.S. retail market share.
From less than 20% of U.S. retail share in 2011 to 50% by 2021 — it’s no wonder that Wal-Mart Stores Inc. (NYSE: WMT) is pouring enormous investment into its own e-commerce business. Wal-Mart claims about a 5% share of the e-commerce marketplace, in third place behind eBay Inc. (NASDAQ: EBAY) with an estimated share of 7.7%.
If Amazon stock continues to rise at its year-to-date rate of 18% and Microsoft shares remain flat, Amazon’s market cap will catch up to Microsoft’s sooner rather than later.
Amazon’s shares closed at $884.67 on Friday, down about 1.3% for the day in a 52-week range of $599.20 to $923.72. The 12-month consensus price target on the stock is $969.74.