Friday, December 18, 2015

Amazon: Value The Pieces, Buy On 'Bad News' $amzn, #earnings, #in

*If investing in Amazon, investors have to understand the powerful importance of cloud (AWS)

*Cloud has a bigger addressable market with less competition and big barriers to entry

*Retail, an important driver, but cloud, something special and new in the land of investing

*Cloud (AWS) was 50% of profits last quarter, and growing much faster than the overall business

*Our earnings predictions are higher than the Street for Q4 and '16, and feel Amazon should be strategically bought if there is "bad news" that gets the stock down


Amazon (NASDAQ:AMZN) likely reports earnings in late January. Until then, many, if not most, investors will be focused on the consumer environment and the potential retail results. That said, we think the financial make-up of Amazon is changing drastically to one focused much more on cloud computing services. We think analysts need to shift a great deal of attention and understanding to AWS (Amazon Web Services, the company's cloud offering) instead of spending time solely understanding retail.

Cloud Becoming Meaningful To Amazon

Last quarter, cloud made up less than 10% of revenues, but more than 50% of profits. Top-line growth was 78% versus the rest of the businesses, excluding AWS, at 20%. The margins at AWS are...


Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. 

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