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There are a number of reasons that could be floated in an attempt to explain why Apples stock happens to be priced only slightly higher than Amazons stock despite the formers market capitalization being twice as large as that of the latter. Ordinarily, one would expect Apples stock to trade at a significantly higher price than that of Amazon as a consequence of the big difference in the market capitalizations of the two companies. To begin with, the price could be impacted by the fact that Apple has more shares outstanding than Amazon. Secondly, the differences in the price of the two companys shares could also be as a consequence of demand and supply factors. The demand for Amazons stock could be high as a consequence of a wide range of factors shaping or influencing investor expectations.
In my opinion, and based on my reading of the relevant materials, investors are willing to pay buy Amazon stock despite Amazons capitalization being significantly lower than that of Apple due to their expectations about the future performance of the two companies. For instance, with regard to expected growth in earnings base, it is likely that investors expect the earnings base of Amazon - despite its significantly lower market capitalization in comparison to Apple to experience enhanced growth going into the future. Key considerations on the...…long-term) than the other. In so doing, I would deploy the debt ratio which, according to Berk, DeMarzo and Harford (2021) is computed by dividing total debt with total equity. The lower debt ratio in the case of Apple is an indication that the company is less leveraged than Amazon and hence less risky in as far as overall debt burden is concerned. This is an important consideration in my case owing to the fact that we face uncertain economic times as a consequence of the COVID-19 pandemic and the ongoing war between Russia and Ukraine. Thus, in the final analysis, on the strength of my analysis of both companies profit generating capabilities and financial…
References
Brigham, E.F. & Houston, J.F. (2015). Fundamentals of Financial Management. Cengage Learning.
Berk, J., DeMarzo, P. & Harford, J. (2021). Fundamentals of Corporate Finance. Pearson
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