How Amazon Gets AWS To $100+ Billion
SunTrust Robinson Humphrey’s Robert S. Peck pointed out that the AWS cloud platform already accounts for a large portion of the valuation, services and future of Amazon.com, Inc. (NASDAQ: AMZN).
The analyst maintained a Neutral rating on the company, with a price target of $600.
AWS Worth >$100 Billion
“We think Amazon is positioned well in a large and growing market and believe the AWS asset is worth >$100 billion,” Peck stated.
Peck also noted that Amazon was not only a dominant player in the cloud market, but also a pioneer in this space. With current market share of about 42 percent, the company is likely to see significant opportunity going forward.
Rapid Revenue Growth
The analyst also mentioned that Amazon has seen “rapid revenue growth” of 70 percent, with a robust operating margin profile of about 25 percent and a TAM of $50 billion by 2019.
With its revenues of $8 billion growing at a rate of 70 percent, combined with robust EBITDA margins of 50-55 percent, Peck believes that AWS could be valued at more than $100 billion, “implying a ~7x revenue multiple and a ~12x EBITDA multiple.”
We think these multiples are reasonable and perhaps conservative given comparison trading multiples.
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