Amazon.com’s Prime Day may grab headlines, but investors are more focused on its fast growing cloud-computing and advertising services businesses.
“AWS alone could be worth more than Amazon’s entire market cap right now, which means you’re essentially getting the retail business for free,” said Marko Lazarevic, a US investment analyst at Harris Associates. “At this valuation, you’re not taking on much risk buying Amazon for the long term.” Retail still accounts for more than half of Amazon’s total sales, but the other businesses are increasingly important, with AWS revenue growing 37% in constant currency terms in 2021, to $62.2bn. The cloud unit, which helps power everything from Netflix videos to robot vacuums, is also the company’s most profitable.
“Amazon is at least 40% cheaper than it should be, relative to the sum of its parts,” said Eric Clark, a portfolio manager at Accuvest Global Advisors. “With expenses falling and AWS and ads continuing to grow, that’s an environment where the stock can really shine. I’m happy to keep buying on dips, because it has a really great catch-up opportunity.”