Currently, Apple is the most valuable publicly listed company in the world, with a market capitalization of $3.6 trillion as of Feb. 17. But I think Amazon (NASDAQ: AMZN) will top that figure before the year's end in 2026.
Amazon is currently a $2.4 trillion company. But a 54% increase in its share price would bring its market value to $3.7 trillion, slightly more than Apple is worth today. In other words, my prediction implies 54% upside for Amazon shareholders in a little less than two years.
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Here are the important details.
Amazon is using artificial intelligence (AI) across its retail and cloud businesses
Wall Street estimates Amazon's earnings will increase at 17% annually through 2026. That consensus makes the current valuation of 41 time earnings look reasonable. But analysts have consistently underestimated the company's earnings. Amazon beat the consensus estimate by an average of 29% over the last six quarters, according to LSEG.
I think analysts are making the same mistake with their current estimates, but this time the catalyst is artificial intelligence (AI). Amazon has the most-visited and largest e-commerce marketplace outside of China in terms of sales, and the company is using AI to recommend products, improve customer service, enhance inventory allocation, and boost fulfillment efficiency with robotics.
CEO Andy Jassy on the fourth-quarterearnings calltold analysts, "We have a number of very significant, I'll call it, productivity and cost-savings efforts in our retail business that are using generative AI." Admittedly, some of those investments may hurt margins in the near term, but should increase profitability in the medium term.
Morgan Stanley analyst Brian Nowak thinks those investments will drive market share gains in e-commerce for Amazon, while also widening the company's ability to "deliver more items faster and more profitably than peers." Importantly, retail e-commerce sales are projected to increase at 11% annually through 2030. But Amazon's retail earnings should grow more quickly as the company gains share and its profit margin expands.
Furthermore, Amazon Web Services (AWS) is the largest public cloud in the world in terms of revenue, and public cloud spending is forecast to grow at 21% annually through 2030, according to Grand View Research. As the largest public cloud, AWS has a key advantage in monetizing AI simply because it has more customers and partners than its peers.
However, AWS has also released nearly twice as many machine learning and generative AI features as other leading cloud providers during the last two years, according to CEO Andy Jassy. Those products create new monetization opportunities, which could ultimately lead to faster earnings growth than analysts anticipate.
Image source: Getty Images.
Amazon could achieve a $3.7 trillion market value by year-end in 2026
Amazon reported earnings of $5.53 per diluted share over the last four quarters, up 91% versus the previous 12-month period. The Wall Street consensus says that figure will reach $7.11 per diluted share by the third quarter of 2026, which implies total earnings growth of 28% during that period.
However, assuming the consensus earnings forecast is 20% too low -- which is less than the average shortfall of 29% during the past six quarters -- Amazon's earnings will hit $8.53 per diluted share in the third quarter of 2026. That number implies total earnings growth of 54% over the next seven quarters.
In that scenario, Amazon shares could increase 54% without any change in the underlying price-to-earnings multiple. Consequently, the company would achieve a market value of $3.7 trillion following its third-quarter report in 2026, in which case Amazon before the end of the year would be worth more than Apple is today.
Admittedly, my prediction is aggressive and could be derailed by economic factors beyond the company's control. For instance, consumer and business spending may falter if inflation continues to increase. However, even if Amazon falls short of $3.7 trillion in 2026, I think the stock will beat the S&P 500 over the next five years. So, patient investors should feel comfortable buying a small position today.
Should you invest $1,000 in Amazon right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
