BofA Gives Amazon Web Services A Gargantuan Valuation

Analysts at Bank of America Merrill Lynch tagged a large valuation on Amazon.com, Inc. AMZN Web Services (AWS) following an AWS summit in New York City.

Research Analyst Justin Post valued the company at 5.5x expected 2016 revenues, which gives AWS a value of $125 per share. Post then gave Amazon a price-to-sales value of 0.94x, putting the overall valuation of Amazon at $475.

At last price, shares changed hands at $443.10.

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Additionally, Post speculated that Amazon may be "sending a signal" that it may start exercising pricing power. The note added that, "Amazon de-emphasized pricing at this presentation and did not highlight all the historical price cuts." In the second quarter, BofA said that it expects Q2 AWS revenue growth at 60 percent, but added that there could be "upside potential" to the number.

Post is also bullish on the underlying macro trends driving cloud computing. Specifically, Bank of America said that cloud computing enables mobile infrastructure, a trend that it finds the "most interesting." Post added, "we also see predictive data utilization as one of the most important characteristics of successful Internet companies."

Amazon is scheduled to report earnings on July 23 after the bell. Heading into that report, Post reiterated its Buy rating on the stock.

The company, which turns 20 years old this month, is trading near its 52-week high of $452.65. Year-to-date, the stock gained 42 percent after two impressive quarterly earnings reports.