Not widely recognized, however, is its more than five-year presence in the cloud- computing industry. The giant, which now sells practically everything, provides Amazon.com, Inc. (NASDAQ:AMZN) Web Services (AWS), allowing companies of all sizes to rent hosted computing and storage. The company is extending its reach by bundling content through Amazon Prime, and reaching more users by selling tablet-device hardware almost at-cost.
It has caught the attention of the CIA, which, as previously mentioned, is looking for a place to hang its proverbial hat. Both Amazon and International Business Machines Corp. (NYSE:IBM) are contenders for the $600 million contract to set up a cloud-computing system for the company. While International Business Machines Corp. (NYSE:IBM) has long supplied the U.S. military and intelligence services with computers, software and the know-how to operate them, a win for Amazon could help unlock doors with other security-sensitive government agencies and commercial clients like Wall Street banks—big.
Fundamentally, Amazon is somewhere in the middle of the two aforementioned stocks. While total revenue has increased every year, operating income has been on a slight decline over the last few years, going from $862 million to $676 million in 2011 and 2012, respectively. Earnings per share is expected to dramatically increase in subsequent years, which can be mainly attributed to the expectation that Amazon will become a bigger name in cloud computing.
The 200-day moving average is rising, indicating a bullish trend, and the current stock price is 22.6% below its one-year target estimate of just over $315. There are other fights Amazon is embroiled in as well, such as declining use for the past two quarters, a forward P/E of 71.9, and a tablet war with both the Apple icon and the Google/Samsung Electronics Co., Ltd. (KRX:005930) powerhouse. All that said, the third-party platform is still growing 40% year-over-year, and with e-retailing growing by the day, Amazon is still in a good position.
Summary
Estimates put current public cloud services upwards of $50 billion for 2013 and growing to a staggering $70 billion in 2015. This growth is approximately four times faster than the IT market as a whole. Cloud-based applications are becoming an easier, more cost-effective way to operate.
There’s no doubt that Apple is at the center of technology’s largest revolution ever, and that longtime shareholders have been handsomely rewarded with more than 1000% gains. However, as the cloud computing continuum continues to flourish, investors should consider Google and Amazon as the ‘aces’ for this hand.
Bill Edson has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, and Google. Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Can These 3 Stocks Jump on Cloud-Computing Trends? originally appeared on Fool.com is written by Bill Edson.
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