Amazon-Salesforce Deal Could Top $50 Billion In Investments (If Cloud Continues Its Rise)
Pacific Crest reiterated an Overweight rating and $800 price target on shares of Amazon.com, Inc. (NASDAQ: AMZN). According to analysts Brent Bracelin, Alyssa Johnson and Edward Yruma, the firm’s bull thesis on Amazon is reinforced by the fact that salesforce.com, inc. (NYSE: CRM) plans to use Amazon Web Services to expand its core SaaS offering (Sales Cloud, Service Cloud, Analytics Cloud and App Cloud) internationally.
In fact, seeing the largest SaaS vendor, which counts with the necessary scale to deploy private clouds, still making a multi-million dollar commitment to rent Amazon Web Services’ infrastructure confirms their idea that AWS offers a differentiated cloud platform.
It should be noted that over the next four years, the Salesforce-AWS contract could result in the consumption of roughly $400 million in cloud services – starting at $70 million in the first year and reaching $126 million in the fourth year. Pacific Crest has estimated that, for every $100 million of AWS consumed, $0.04 are added to EPS and $0.11 to EBITDA per share.
Taking this into account, the analysts recommended growth investors to continue to hold Amazon’s stock, pointing out that AWS not only has a four-year first-mover advantage over Microsoft (NASDAQ: MSFT) Azure and six-year advantage over Google (NASDAQ: GOOGL) (NASDAQ: GOOG) Cloud Platform, but they also expect its IaaS share could surge to 53 percent by the end of the year.
“This would be larger than all of its competitors combined. AWS remains a key upside lever to revenue and profits this year and next, in our view,” they concluded.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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