- Citing enthusiasm about the AWS figures broken out in Amazon's (NASDAQ:AMZN) April 23 Q1 report, Bernstein has hiked its target by $150 to $600, while reiterating an Outperform.
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Bernstein: "[W]e were surprised by AWS's current profitability trajectory, as our assumption had been that Amazon was investing more in sales and in R&D to drive AWS's current hyper-growth." The firm thinks the numbers suggest AWS has more pricing power than previously believed, and notes Amazon has slowed its once-manic price-cutting pace over the last 12 months. "This price discipline coupled with declining costs for computing and storage explain in part the fast margin expansion we have seen for AWS starting in 2Q15."
- Amazon stated AWS had a $265M Q1 op. profit on revenue of $1.57B, and an op. profit of $680M over the trailing 12 months via revenue of $5.16B. JPMorgan responded by valuing AWS at $66B.
- Analyst Ben Thompson in a Wednesday post: "The profitability of AWS is a big deal in-and-of itself, particularly given the sentiment that cloud computing will ultimately be a commodity won by the companies with the deepest pockets ... Amazon is clearly reaping the benefits of scale from being the largest player, and their determination to have both the most complete and cheapest offering echoes their prior strategies in e-commerce."