Online retailer and cloud computing specialist Amazon (AMZN) has pretty much conquered the retail landscape. It’s now an indispensable part of shopping, not just in America, but worldwide as well. Its latest move demonstrates its sheer diversity as a brand as well. That combination of retail primacy and enormous versatility keeps me deeply bullish on Amazon as a whole.
Looking at Amazon’s stock charts for the year so far demonstrates its incredible value for shareholders. Despite a series of ups and downs, the company’s share price spent less than a week, throughout this entire year, valued at less than $3,000 per share.
Though the company has seen plenty of spikes and retractions, its overall trajectory for the year has been largely upward. There was a substantial loss between mid-February and early March. However, the company recovered from that rapidly enough and established its first of a series of highs for 2021. (See Amazon stock charts on TipRanks)
The latest move from the company, meanwhile, demonstrates its growing versatility. Amazon, working with Goldman Sachs (GS), established GS Financial Cloud for Data with Amazon Web Services. The move is part of a larger effort on Goldman Sachs’ part to deliver access to its market data, as well as its software tools, to customers who may find it useful. Amazon’s efforts will provide the technological underpinnings to the Goldman Sachs project. This isn’t the first such project Amazon has had a hand in, and it likely won’t be the last, either.
Users of GS Financial Cloud for Data with Amazon Web Services will find a range of tools available to them. One such tool gives them the ability to chart the relationship between a certain stock and currency exchange rates. Such a project might have taken months before, reports noted, but with the new tools, it would take only several minutes instead.
Wall Street’s Take
Turning to Wall Street, Amazon has a Strong Buy consensus rating. That’s based on 31 Buys assigned in the past three months. The average Amazon price target of $4,116.94 implies 21.5% upside potential.
Analyst price targets range from a low of $3,800 per share to a high of $4,700 per share.
Retail’s Gold Standard Branches Out
Amazon was formidable enough when it became the answer to brick-and-mortar retail worldwide. Online retail used to be a highly fragmented affair, made up of dozens, if not thousands, of individual websites and shops. Now, Amazon has centralized that process, and brought millions of shoppers under one umbrella. That alone would make Amazon worth a Buy. Maybe not a $3,800 Buy, but a Buy nonetheless. There’s a lot to be said for convenience, and its accessibility to small businesses doesn’t hurt either.
Amazon’s branching into cloud computing, though, is what takes it from a solid Buy to a very good Buy indeed. Retail is capricious. The second there’s an economic downturn and customers start pulling in their collective wallets, that sends the retailer into a spiral as well. Even as we’ve seen lately, retailers are also at the mercy of the supply chain. People had plenty of money they were willing to spend, but there was increasingly less merchandise to spend it on.
Meanwhile, Amazon took steps to become more than just a provider of retail products. Today, Amazon Web Services serves as the underpinnings of a huge chunk of the internet. In fact, a Canalys report from the first quarter of 2021 noted that Amazon Web Services represents 32% of worldwide cloud infrastructure.
By way of comparison, Microsoft (MSFT) Azure makes up 19%, and Google (GOOGL) Cloud has 7%. That means Amazon Web Services accounts for more of cloud computing infrastructure than its two closest competitors combined, and that’s just for starters. Amazon Web Services has been spotted working with companies like Volkswagen (VWAGY) to standardize its computing platforms. With services ranging from short-term data storage to long-term data archival and beyond, Amazon Web Services’ versatility makes it attractive, and makes Amazon itself attractive by proxy.
Concluding Views
If Amazon were merely the web’s biggest retailer, it would still be a worthwhile buy. Too many companies are routing too many goods, to too many people, for it not to be attractive. What justifies Amazon’s massive valuation, and provides the potential for increase, is its web services operation. The latest move it’s made with Goldman Sachs simply underscores that potential.
Amazon will sell you just about anything you can buy legally online. That’s great, in and of itself. When it also provides the infrastructure to make shopping online or using certain tools or even going to websites possible, that only improves the situation. Amazon may be pricey, and trading near its highs, but Amazon may have not even found what those highs are just yet. Investing in Amazon is investing in its next leg up, which looks increasingly more likely to happen.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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