Amazon Cloud Unit on track for $3 trillion valuation, says Redburn

(Bloomberg) — Amazon.com Inc.’s cloud storage business is on track to be worth $3 trillion, nearly triple the value of the entire industry today. company on the stock market, according to an analyst at Redburn Ltd.

The unit, Amazon Web Services, is so powerful that the company may decide at some point to separate it from the massive, slower-growing online retail operation, analyst Alex Haissl wrote in a 128-page report initiating cloud computing coverage. industry. He did not say when the $3 trillion value might be reached.

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“Separating AWS may not be on the table right now, but if the performance gap to non-AWS parts continues to widen, it could be on the table later, said writes Haissl, former head of automotive research at Berenberg. and Credit Suisse Group AG which began its career as a policeman in Vienna.

Haissl recommends buying Amazon stock and sees the stock hitting $270 next year, the highest target on Wall Street and 150% above Tuesday’s closing price. It also rated Microsoft Corp. a buy, Snowflake Inc. as neutral and has a sell on MongoDB Inc.

Amazon Web Services revenue jumped 37% to $18.4 billion in the first quarter, even as the company’s core e-commerce business saw a drop in sales. “There’s no sugar coating on the weak performance” of online retail, he said, adding that “we don’t think the business is structurally broken down.”

Amazon’s cloud unit is better positioned than competitors run by Microsoft and Alphabet Inc. because it has lower costs and better technology, Haissl wrote. Amazon Web Services accounts for less than 20% of Amazon’s revenue but will contribute all of its revenue this year, he wrote.

However, Bloomberg Intelligence analyst Anurag Rana, who estimates the value of AWS at $1.5 trillion to $2 trillion, said, “Microsoft may be better positioned than Amazon Web Services and Alphabet’s Google as enterprises are accelerating their transition to a hybrid cloud model, given its heavy footprint in on-premises IT infrastructure.

“Amazon is highly unlikely to spin off its cloud segment, as it is the source of many funds for the company’s other business units,” Rana said.

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