Why Alphabet May Beat Amazon in the Race to a $1,000 Stock

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Investors have loved the greatest growth stories in America since the dawn of the modern era. So what if these great growth companies are impossible for shareholders to make many waves in, and so what if dividends are just too old-school. Being along for the rise is generally more important, at least if you are on the right side of it. With the bull market having lasted from March 2009 to May of 2015 without a major bear market, here is the ultimate bull market investor question. Between the great Alphabet Inc. (NASDAQ: GOOGL) and Amazon.com Inc. (NASDAQ: AMZN), which stock can hit the $1,000 mark first.

Investors should understand that just asking this question might be a jinx. It may seem like pure bull market speculation on the surface. Yet, it is also a legitimate question that bullish growth investors might want to consider. If these companies continue on their path of growth and great surprises, one or both of the stocks could get to the $1,000 share price.

There might be more issues in common with these companies than meets the eye. Both are dominated by their founders, and both companies are now mega-cap giants in their fields. Both have highly complex models and they have potentially endless avenues for growth ahead as they can disrupt industry and after industry. Analysts and investors alike are enthralled by them.

Alphabet shares have close to a $718.00 share price, with a $493 billion market cap. Revenue in 2015 was $74.9 billion, and net income was $16.35 billion before special items. The company formerly known as Google has a 52-week trading range of $538.85 to $810.35.

Amazon shares trade at close to $698.00, with a $329 billion market cap. Its revenue was $107 billion in 2015, but net income before items was only $596 million. Amazon’s 52-week range is $419.14 to $722.45.

High growth rates are expected to remain in place, according to Thomson/First Call consensus estimates. Google’s 2018 revenues are expected to be $115.1 billion, some 54% higher than in 2015. By 2018, Amazon’s revenue is expected to have risen by another 82% from 2015 to $194.6 billion.

Where things get tricky is over gross margins. Alphabet’s gross profit margin was 63.5% in 2015, and Thomson/First Call sees that remaining 65.0% in 2018. Amazon’s gross margin, which is a constant sticking point for many investors and analysts alike, was 33.0% in 2015 and it is expected to be 36.5% in 2018.

Net income is another massive disparity here. This is the after-tax income and can fluctuate wildly. Alphabet is expected to see net income rise to $33.4 billion in 2018, up 63% from 2015. Amazon’s net income is expected to be $8.1 billion in 2018, up 13-fold from 2015.