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Amazon Inches Closer to $1 Trillion Market Cap: ETFs in Focus

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Online e-commerce behemoth Amazon (AMZN - Free Report) is heading toward $1-trillion market cap as its shares topped $2,000 for the first time. Shares of AMZN closed at $2,002.38 on Aug 29 and are just some dollars away from reaching 13-digit market capitalization. At $2,053 per share, Amazon will become the second U.S. trillion-dollar company after Apple (AAPL), which crossed the threshold on Aug 2 (read: Amazon Tops $900B on Record Prime Day Sales: ETFs to Tap).

Below, we have highlighted some solid reasons for the consistent surge:

Bullish Calls

Morgan Stanley (MS) this week lifted Amazon’s price target from $1,850 per share to $2,500 per share, citing huge growth for the e-commerce giant's traditional retail as well as web service units. At $2,500 stock price, Amazon would have a market valuation of about $1.2 trillion. This represents the highest price target on the Wall Street. In fact, 31 of 47 analysts surveyed by FactSet have stock price targets above Amazon’s $1 trillion market cap threshold of $2,050.27 (read: 5 Tech ETFs Leading the Surge This Week).

According to Baron Capital analyst Ashim Mehra, Amazon could double its value to about $2 trillion in three to five years driven by growth in advertising revenue and its cloud business.

Further, option traders bet Amazon will hit $1 trillion by next week.


Earnings Strength

Amazon shares was also boosted by its solid Q2 earnings, wherein it delivered massive earnings beat of 103.61% and the biggest quarterly profit of $2.5 billion in its history, powered by the fast-growing cloud computing business and strength in online sales.

Earnings per share came in at $5.07, more than double the Zacks Consensus Estimate of $2.49 and up by a wide margin the year-ago earnings of 40 cents. Revenues climbed 39% year over year to $52.9 billion but fell short of the estimate of $53.4 billion. In particular, revenues from the cloud computing business — Amazon Web Services (AWS) — surged 49% year over year to $6.1 billion (read: ETFs to Ride High on Amazon's Soaring Q2 Profit).

For the third quarter of 2018, the company expects revenues to grow 23-31% to $54-$57.5 billion.

Solid Fundamentals

Amazon has seen whopping earnings estimate revisions of $4.83 to $17.27 for this year over the past 60 days. This indicates substantial year-over-year growth of 279.6%. Revenues are expected to grow 32%.   

Additionally, Amazon currently carries a Zacks Rank #1 (Strong Buy) and has a Growth Score of A. However, it belongs to the bottom-ranked Zacks industry (bottom 21%) (see: all the Technology ETFs here).   

ETFs to Tap

Given this, investors seeking to tap the bullishness in the tech titan could consider the following ETFs that have AMZN as the top firm in their portfolio:

Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) — The fund carries a Zacks ETF Rank #2 (Buy), with a Medium risk outlook. Amazon accounts for 25.2% share (read: 5 ETFs to Buy as Consumer Confidence Surges to 18-Year High).

ProShares Online Retail ETF (ONLN - Free Report) - This fund debuted in the space on Jul 13 and has accumulated $15.9 million in its asset base. Amazon makes up for 24.2% in the fund’s basket.   

Vanguard Consumer Discretionary ETF (VCR) - This ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Amazon has 23.1% allocation.

iShares U.S. Consumer Services ETF (IYC - Free Report) — It carries a Zacks ETF Rank #2 with a Medium risk outlook. Here, AMZN takes 21.8% share.

VanEck Vectors Retail ETF (RTH - Free Report) — The fund has a Zacks ETF Rank #3 with a Medium risk outlook. Amazon makes up for 20.4% of the assets (read: ETFs Buoy on Booming Q2 Corporate Profits: 5 Best Charts).

Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report) – It has a Zacks ETF Rank #2 with a Medium risk outlook. Amazon makes up for 20.8% in the fund’s basket

iShares Global Consumer Discretionary ETF (RXI - Free Report) - AMZN accounts for 16.3% share in the basket.

iShares Evolved U.S. Discretionary Spending ETF (IEDI - Free Report) - This fund debuted in the space on Mar 21 and has accumulated $5.7 million in its asset base. Amazon has 12.1% allocation.

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