Amazon Cloud Unit on course for US$3 trillion value, Redburn says

AMAZON.COM'S cloud-storage business is on a clear path toward a US$3 trillion value, almost triple what the whole company is worth now in the stock market, according to a Redburn analyst.

The unit, Amazon Web Services (AWS), is so powerful that the company may decide at some point to split it off from the massive, slower-growing online retail operation, analyst Alex Haissl wrote in a 128-page report initiating coverage of the cloud-computing industry. He didn't say when the US$3 trillion value may be achieved.

"Separating AWS may not be on the table for now, but if the performance gap versus the non-AWS parts continues to widen, it could be on the table further down the road," wrote Haissl, a former head of automotive research at Berenberg and Credit Suisse Group who began his career as a police officer in Vienna.

Haissl recommends buying Amazon shares and sees the stock reaching US$270 in the next year, the highest target on Wall Street and 150 per cent above Tuesday's closing price. He also rated Microsoft a buy, Snowflake as neutral and has a sell on MongoDB.

Amazon Web Services' revenue jumped 37 per cent to US$18.4 billion in the first quarter even as the company's core e-commerce business saw a decline in sales. "There is no sugar-coating the weak performance" of online retail, he said, adding that "we do not think the business is structurally broken."

The Amazon cloud unit is better positioned than rivals run by Microsoft and Alphabet because it has lower costs and better technology, Haissl wrote. Amazon Web Services accounts for less than 20 per cent of Amazon's revenue but will contribute all of its earnings this year, he wrote. BLOOMBERG