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Technology


AMAZON CLOUD UNIT ON COURSE FOR $3 TRILLION VALUE, REDBURN SAYS

By

Subrat Patnaik

+Follow
June 29, 2022 at 11:07 AM GMTUpdated onJune 29, 2022 at 1:31 PM GMT


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Amazon.com Inc.’s cloud-storage business is on a clear path toward a $3 trillion
value, almost triple what the whole company is worth now in the stock market,
according to a Redburn Ltd. analyst. 

The unit, Amazon Web Services, is so powerful that the company may decide at
some point to split it off from the massive, slower-growing online retail
operation, analyst Alex Haissl wrote in a 128-page report initiating coverage of
the cloud-computing industry. He didn’t say when the $3 trillion value may be
achieved.


 
 

“Separating AWS may not be on the table for now, but if the performance gap
versus the non-AWS parts continues to widen, it could be on the table further
down the road,” wrote Haissl, a former head of automotive research at Berenberg
and Credit Suisse Group AG who began his career as a police officer in Vienna.




Haissl recommends buying Amazon shares and sees the stock reaching $270 in the
next year, the highest target on Wall Street and 150% above Tuesday’s closing
price. He also rated Microsoft Corp. a buy, Snowflake Inc. as neutral and has a
sell on MongoDB Inc.




Amazon Web Services’ revenue jumped 37% to $18.4 billion in the first quarter
even as the company’s core e-commerce business saw a decline in sales. “There is
no sugar-coating the weak performance” of online retail, he said, adding that
“we do not think the business is structurally broken.” 



The Amazon cloud unit is better positioned than rivals run by Microsoft and
Alphabet Inc. because it has lower costs and better technology, Haissl wrote.
Amazon Web Services accounts for less than 20% of Amazon’s revenue but will
contribute all of its earnings this year, he wrote. 

However, Bloomberg Intelligence analyst Anurag Rana, who estimates the value of
AWS at $1.5 trillion to $2 trillion, said “Microsoft could be better positioned
than Amazon Web Services and Alphabet’s Google as enterprises accelerate their
shift to a hybrid-cloud model, given its strong footprint in on-premise IT
infrastructure.”

“Amazon is highly unlikely to spin off its cloud segment, since it’s the source
of many funds for the company’s other businesses units,” Rana said. 

(Adds more analyst commentary in the penultimate paragraph.)




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