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Amazon upgrade by Morgan Stanley could make it second US company with US$1 trillion valuation

Rapidly growing cloud, subscription and advertising business to push revenues much higher
Amazon store.
Amazon.com is the world's largest online retailer

Amazon.com Inc (NASDAQ:AMZN) was given an upgrade by investment bank Morgan Stanley (NYSE:MS), a move that could make the e-commerce giant the second US company with a valuation topping US$1tn after iPhone maker Apple Inc (NASDAQ:AAPL).

Morgan Stanley analyst Brian Nowak said in a note to clients that it had increased its price target for Amazon shares to US$2,500 from US$1,850, representing a nearly 30% upside to the Tuesday close of US$1,932.82, a report by CNBC said. The stock was up 1.15% in premarket trade at US$1,955.

At a price of US$2,500 per share, that would give Amazon a market valuation of US$1.2tn. Nowak reiterated Morgan Stanley's overweight rating for the stock, the CNBC report said.

READ: Apple beats Amazon in race to a $1 trillion market cap

"We have increasing confidence that Amazon's rapidly growing, increasingly large, high margin revenue streams (advertising, Amazon Web Services, subscriptions) will drive higher profitability and continued upward estimate revisions," the CNBC report quoted Nowak as writing. 

The analyst added Amazon's high-profit margin businesses such as cloud computing, subscriptions and advertising will generate nearly US$45bn in profit by 2020, compared with an estimated US$25bn in 2018.

Amazon is an electronic e-commerce and cloud computing company based in Seattle, Washington. It is the largest internet retailer in the world.

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