Amazon.com Inc. (NASDAQ:AMZN) seems to be off to a pretty good start to the new year on the market floor, as the stock has been flirting with all-time highs Monday in the wake of strong e-commerce growth numbers being reported. There is another report that Monday afternoon at the Consumer Electronics Show in Las Vegas, Amazon will announce a partnership with Ford to present Amazon Cloud Player in certain 2013 Ford models using voice commands.
While those two items are noteworthy on their own, they are combined with a recent research note about Amazon.com Inc. (NASDAQ:AMZN) that suggests Amazon Web Services may be a bigger deal in cloud computing services than anyone might realize. This could be yet another reason why Morgan Stanley recently upgraded Amazon stock and placed a $325 price target on it.
A research note sent Monday by Macquarie Capital seemed to establish some weight on one side of a debate regarding Amazon.com Inc. (NASDAQ:AMZN) cloud-computing services. There has generally been two camps regarding Amazon Web Services – one that believes that segment is working on very thin margins and is not profitable, while the other camp says it could very well be a very successful company on its own if it were to spin off.
Macquarie Capital seemed to show in its note that, while Amazon.com Inc. (NASDAQ:AMZN) doesn’t break out its cloud computing as separate revenue lines in its reports, if AWS were to be a standalone company, it could very well be worth about $19 billion. In the note to investors, analyst Ben Schacter wrote that Macquarie is estimating that AWS could very well account for more than half of the cloud market, which is estimated would rise to more than $70 billion by 2015 and that AWS would address about $38 billion of the market.
But how does Macquarie get to the $19 billion figure if AWS were a spinoff of Amazon.com Inc. (NASDAQ:AMZN)?
That number is based on an estimate by Macquarie that Amazon Web Services will account for about $3.8 billion in revenue for Amazon.com Inc. (NASDAQ:AMZN), which is about 5 percent of the estimated total. The $19 billion figure comes from multiplying that estimate by five to determine a valuation of the division if it were to be spun off as its own company. In the estimates, Macquarie predicts that AWS will eventually grow to $8.8 billion in revenue by 2015, adding its share of overall company revenue from the current 5 percent estimate for 2013 to 7 percent in two years.
By the way, the gross profit estimate for AWS is expected to be 20 percent of the total for Amazon.com Inc. (NASDAQ:AMZN) in 2013 and grow to nearly 30 percent in two years.
What are your thoughts about Amazon.com Inc. (NASDAQ:AMZN)? Do you believe in the reports about Amazon Web Services, and how does this affect how you see the company moving forward? We’d love your feedback and comments about this online retailer and its influence on consumers.
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