Amazon stock should be valued at $800: Brian Nowak

Morgan Stanley Analyst Brian Nowak believes Amazon stock should be valued at $800

Amazon.com Inc. shares in the last few months have been trading on an upward path along with the bullish stance being mainly driven by its cloud computing division, Amazon Web Services. Earlier in April, the online retail company for the very first time listed its AWS division independently on its financial statements from others. On the other hand, the share of the company has increased by over 60% from then until now. While during the same period there has been only 1.76% increase in NASDAQ.

The company is currently seen as the leader of the market in the overall cloud landscape with its AWS segment reflecting improvement at a faster pace in the last few quarters. During the recent quarter, revenue from AWS improved by over 78% on year over year basis to almost $2.085 billion contributing 8% to the company’s top line revenue.

Given the present rushing in cloud adoption between businesses joined with the absence of big competitor, AWS segment revenue contribution might easily turn into double digits in the upcoming quarters.

Depending on the ample positive surrounding the company’s cloud computing strength, Brian Nowak, an analyst at Morgan Stanley increased his target price on Amazon stock to $800 from previous $750. The analysts believe that in the future AWS might improve exponentially to ultimately become the source of more than half of giant retailer’s overall profitability. He also mentioned that ‘accelerating public cloud adoption’ has promoted AWS expressively. Actually, the company’s AWS in its base case valuation model for the company on the basis of the improving bright prospects of the segment.

The analysts also added that though Amazon retail margins in North American enhance by only 300 basis points till the end of 2020 while global margins increase 2% shares of the company might value at approximately $800. Currently, Morgan Stanley has an overweight rating on the stock.
By the year 2020, Nowak believes that the cloud business will be in the top five IT Company and in the future it will have an overall market of approximately $750 billion.

In a note, Morgan Stanley said, “AWS is driving and benefitting from accelerated public cloud adoption…We now include AWS in our best case valuation methodology.”

AWS is by far the major infrastructure provider, in which client companies rent data storage and computers through the internet cloud.

Black Friday has already started for Amazon Prime members, who got access to the deals before regular customers.

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