With a core online retail business encompassing grocery to consumer electronics and everything in between, and an exemplary logistics infrastructure with the ability to meet consumers’ requirements for theses stay-at-home times, online giant Amazon (AMZN) is well set up to weather the COVID-19 storm. The market has reflected this notion, too, and amazon stock has held up relatively well, year-to-date in the green.
But there is an additional growth driver not mentioned quite as often. Aegis Capital’s Victor Anthony believes Amazon Web Services’ (AWS) growth is the reason why the company “is one of the best investments for the next five years.”
The 5-star analyst maintains a Buy rating on Amazon shares along with a $2,525 price target, which implies nearly 30% upside from current levels. (To watch Anthony’s track record, click here)
The data speaks for itself, says Anthony. According to cloud costs managing company Vangal, AWS should see revenue grow between 37% and 39% in 1Q20 compared to 34% in 4Q19. Anthony notes how cloud companies are the beneficiaries of “increased in-home entertainment services, business communications, and more healthcare and government utilization.” Amazon’s “footprint and set of services” are what sets the company apart.
Furthermore, Amazon has “three key competitive advantages,” Anthony noted. “(1) the number of people trained and certified on AWS is more than GCP and Azure combined; (2) their product suite span a set of products that companies can use easily and is developer friendly; and (3) AWS has better developer support – better, faster and quicker than the others.”
What’s more, along with favorable pricing for basic workloads, Amazon’s diversified customer mix is a further advantage – smaller customers make up between 37 and 39%, midsize businesses add another 26% and at the top end of the scale, enterprise amounts to 35%.
Wall Street tends to agree with the analyst's confidence on the online giant. One lone Hold rating moves aside for the bullish charge of 36 Buys. Therefore, Amazon’s Strong Buy consensus rating is accompanied by a $2,432.91 average price target, suggesting possible upside of nearly 27%. (See Amazon stock analysis on TipRanks)
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