2020.01.17; FJa17th: Alphabet Becomes Fourth U.S. Company to Ever Reach $1 Trillion Market Value | MarketScreener
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Alphabet Becomes Fourth U.S. Company to Ever Reach $1 Trillion Market Value
01/16/2020 | 10:21 pm
Google parent Alphabet Inc. became the fourth U.S. company ever to achieve a $1 trillion market value Thursday, punctuating a powerful rally in shares of large internet stocks to start 2020.
The search-engine giant joins peers Apple Inc., Amazon.com Inc. and Microsoft Corp. as the only firms to reach the threshold during intraday trading. Apple and Amazon accomplished the feat in the summer of 2018, while Microsoft hit $1 trillion for the first time in April of last year. Amazon never closed above $1 trillion and has fallen well behind Apple and Microsoft, which have rocketed past that level recently.
The massive gains for technology stocks come with Silicon Valley companies ascending to the forefront of the world economy and flexing their muscles in new arenas such as health care and transportation. Despite concerns about stricter regulatory scrutiny, the biggest technology companies have continued soaring in value, highlighting how investors favor firms that steadily improve sales in a world with sluggish economic growth and low interest rates.
Shares of smaller companies seen as disruptive and having outsize growth potential also have soared in the new year, including electric-auto maker Tesla Inc. and plant-based meat-alternative maker Beyond Meat Inc. The broad gains have helped drive major indexes to records.
Alphabet has had to combat rising costs and privacy concerns in recent years, but the resilience of its core online advertising business has continued to buoy the stock.
"It's really been a cash cow," said Dan Morgan, a senior portfolio manager who focuses on tech at Synovus Trust Co., which owns Alphabet shares. "They've been steadily continuing to post 15% to 20% growth, which is pretty amazing when you consider how mature that model is."
The largest five companies in the S&P 500 -- Apple, Microsoft, Alphabet, Amazon and Facebook Inc. -- now account for more than 19% of the index in terms of weighting. Five years ago, the largest five components in the broad equity gauge made up 12%, illustrating the growing dominance of a handful of the biggest tech stocks.
"When growth is scarce, investors are willing to pay up for any company that's able to deliver," said Amanda Agati, chief investment strategist at PNC Financial Services Group. "It's been a very long, slow, sluggish economic growth cycle."
The concentrated gains have fueled concerns that a pullback in the leading tech shares could drag down the entire market. But major indexes have shaken off brief selloffs in recent years to rally to records. The S&P 500 just logged its biggest annual gain since 2013 with trade tensions receding and interest rates around the world falling.
Alphabet was created in 2015 when Google formed a new parent company to separate its core business from a host of other segments focused on everything from robotics to self-driving cars. The firm has benefited from its acquisitions of YouTube and internet advertising company DoubleClick Inc. more than a decade ago and made more deals since to create a dominant digital ad machine.
Google went public in August 2004, making its time as a public company and rally to a $1 trillion market value much shorter than that of other technology giants. Apple and Microsoft became public companies in the 1980s, while Amazon's initial public offering took place in 1997.
It has taken Alphabet only a few months to boost its market capitalization -- calculated by multiplying its share count for each class of shares by the price -- from $900 billion to $1 trillion. That marks the company's fastest such $100 billion advance, according to Dow Jones Market Data. Alphabet took almost two years to cross the $900 billion mark from $800 billion in November.
The stock has surged since the company said in early December that Google co-founders Larry Page and Sergey Brin were stepping down from managing Alphabet and ceding control to Google Chief Executive Sundar Pichai. Analysts have suggested Mr. Pichai could further buoy the stock either by increasing buybacks or potentially instituting a dividend payment for the first time in the company's history because a chunk of his bonus is tied to share performance.
That anticipation has helped fuel gains ahead of the company's fourth-quarter earnings report, which is scheduled for early next month.
"The key, medium-term focal point this quarter will be any signs of a more shareholder-friendly approach under the new leadership," Deutsche Bank analysts said in a recent note to clients.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
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