According to an analyst at MKM Parnters, Alibaba will be the first trillion dollar internet company and not Amazon like many may assume.
Analyst Rob Sanderson wrote in a note to clients on Friday, “It seems likely to us that we will have multiple $1 trillion valuation companies within the next 1-3 years if the current bull market continues. In this note, we examine the pathways of the six leading contenders: Apple, Google, Amazon, Facebook, Tencent and Alibaba.”
In his note, which is entitled, “Pathways to $1 Trillion Valuation and Who Arrives There First,” the analyst also states, “An argument can be made for each company achieving $1 trillion in market cap by 2020, with a case for Apple in 2019. We think it’s most likely 2021 when the barrier is broken by an Internet company, but think BABA may have the best chance for 2020 despite being the smallest of the mega-caps today.”
“We believe that opportunities for further monetization gains are plentiful, largely within the company’s control and that ad-loads represent a considerable growth driver that is at the discretion of management,” he also wrote. “We think that BABA may have the best chance among Internet mega-caps to become the first $1 trillion company.”
According to Sanderson, the company can reach a market cap of $1 trillion by 2020 if it generates EPS that is 20% above expectations next year, grows earnings by 45% in the year after, and preserves its 24 times forward price-earnings ratio.
Sanderson has a buy rating on the stock and a price target of $220.
Disclaimer: We have no position in Alibaba Group Holding Ltd (NYSE: BABA) nor Amazon.com, Inc. (NASDAQ: AMZN) and have not been compensated for this article.