Is Amazon A Bargain Again?

Apr.29.13 | About: Amazon.com, Inc. (AMZN)

Amazon (NASDAQ:AMZN) has been on a roller coaster so far this year, bouncing between roughly $255/share, its current price, and $275.

The latest move has been a hard fall blamed on a revenue miss of about $130 million.

But does this make the stock a bargain again?

Quartz recently unpacked Amazon's cloud revenues from the rest of its earnings, using the company's own figures, and came out with $600 million/quarter, or $2.4 billion/year. ReadWrite thinks the company can do $3.8 billion in cloud revenue for all of 2013, meaning it is growing at more than 50%/year.

That's almost twice the revenue run-rate as Rackspace (NYSE:RAX), the main OpenStack cloud services provider, which is currently worth $6.6 billion

Before just throwing a $13 billion value estimate at the unit, consider some of its latest announcements, especially CloudHSM, which will make Amazon's cloud compliant with current data security standards. That could dramatically improve its competitiveness with private cloud experiments. Small wonder that Business Insider puts a $19 billion valuation on Amazon Web Services.

Take that out of Amazon's market cap and you have $97 billion lifting last year's $60 billion in retail revenue. That's a cost-sales ratio of about 1.7, much higher than the industry averages, but well short of Microsoft's (NASDAQ:MSFT) ratio of 3 and consistent with the rate at IBM, which is not growing its top line at all.

When Amazon bears look at the stock, they have a bad habit of looking only at its bottom line. Amazon doesn't care about the bottom line. It is entirely managed for the top line, believing that we're still in the early innings of the Internet revolution, and that by dominating the whole ecosystem - cloud, services, devices - it can roll up the entire space.

That's just what Amazon is currently executing on. I sold out a year ago at about $230, but maybe it's time to get in again.

Disclosure: I am long IBM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.