Jim Cramer: The Race to Be the First Trillion Dollar Company

 | Apr 19, 2018 | 12:12 PM EDT
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And they're off!

Yep, it's race to be the first trillion dollar company and the handicapping shows an insanely close race.

Right now there are four companies coming around the first turn and it could portend to be a lot closer race than most handicappers saw coming. I am not predicting a photo finish, there's too many billions between the current capitalizations and the finish line.

But let me call the race as it currently stands. First, there's the favorite, Apple (AAPL)  , with a capitalization that currently stands at $880 billion making it the putative favorite. But we have three companies all coming on strong at once and they are extraordinarily and ridiculously closely bunched: Amazon (AMZN) at $754 billion, Alphabet (GOOGL) at $749 billion and Microsoft (MSFT) at $743 billion.

In full disclosure I owe the concept of the race to a trillion to Morgan Stanley which did a focused piece pushing Microsoft entitled "3Q Preview: Milepost Along the Path to $1 Trillion."

The analyst, the incredibly good Keith Weiss, put the idea in my head even as he didn't speculate about the other three horses and who would cross the finish line first.

Going into the race, when the horses were still in the paddock, Apple seemed like such a favorite that the payout seemed much too low to even bother to bet on. Two bucks gets you Two Ten. Sure enough when they came out of the gate, a month ago, the handicappers didn't even think it could be close, that's how big a lead Apple had on the field. Jockey Tim Cook looked like he would win going away.

But then we started to hear about chinks in the story around the first turn, namely that Apple's new X had tepid sales, sales that could possibly be made up by the lucrative service revenue and the possibility of a gigantic, perhaps as large as $100 billion return of capital in buybacks and dividends.

That has kept Apple in the lead at what I now regard as the race's midpoint but this morning we got a piece of research from Mizuho that has shortened Apple's distance from the pack rather dramatically, I'd say a ten-furlong lead cut to about five. The story? Mizuho says that it's not just the X that's tepid, the eight and eight plus might miss. The firm goes a step further and says that whatever money Apple returns to shareholders is already discounted by the stock.

Can Apple fade? Absolutely. More important, though, the other horses are coming on strong. Last night Amazon's jockey, Jeff Bezos penned a note about how Amazon Prime now has 100 million paid Prime members globally. Bezos said the company has shipped more than five billion items and more members joined Prime than in any previous year. Amazon had been burdened by some heavy weight, namely a president that wants the company's deal with the US Post Office to be ripped up with a new one giving the post office fairer terms. Plus Amazon doesn't collect taxes on the third party sellers, who are responsible for more than half of the units sold. The Supreme Court's considering the situation. If the president stops tweeting and the court rules in favor of the third party sellers, and Amazon's lucrative web services business stays strong, the trophy may go to Bezos.

Don't count out Microsoft. Morgan Stanley points out that "near -term results and guidance should support a path to $1 trillion market cap" and as a handicapper from way back I have to agree. Jockey Satya Nadella has switched the company's focus from the slow-growing Windows products and enterprise software to the cloud, it's incredibly fast growing Azure business as well as its shrewd Linked-In acquisition. I like the prospects.

Finally a stock that I always thought could, one day, be neck and neck with Apple if the latter slipped up, Alphabet, has come back into the race after what can only be described as a series of lost races where it was hung on guidance. But today Deutsche Bank comes out with a brilliant piece entitled "Google can bear a low bar in 1Q18, buy." The gist? Deutsche thinks that the hot money has gone elsewhere and the odds have gotten so long that you could have a dark horse backed by a potentially positive tone about Google Cloud, You Tube and search. Yep, an in-line quarter could make this one a photo finish.

Who's going to win? Mid-point of the race, anything can happen. Right now, though, Amazon's the one that could break away from the three-horse pack. Can it pass Apple? Not if Apple surprises to the upside this quarter, but if it misses and Amazon delivers, the roses may very well belong to Bezos.

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