Amazon (AMZN) stock price has fallen marginally after a great run last quarter. The tech stock could be testing support levels for a huge bull run. AWS could drive this growth.
Amazon.com Inc (NASDAQ: AMZN) stock price has cooled over the weekend. Sources say that the stock closed at $2,286.04, -$86.67 (-1.03%) on Friday. This comes after Amazon (AMZN) stock price reached an all-time high earlier this year.
Amazon (AMZN) stock price was also lower at pre-market levels of $2,256.00 −$30.04 (1.31%). As of the time of filing this report, AMZN stock was at $2,322.26 (+1.58%). Pundits believe that the current situation may be setting Amazon for a bull run well into 2024. Some even think that the technology giant’s stock could be worth $4,900 by then.
It also shows that the stock prices may be testing a support level for a major ride upwards. Amazon’s recent earnings report was widely positive with a few downsides. The revenues were up and above expectations. The earnings per share though were at $5.01 as against the expected $6.25.
Amazon (AMZN) Stock Price Falls Marginally Despite Great Numbers
This has presented a clearer picture of the Jeff Bezos‘ run. Amazon’s $75.45 billion revenue is an increase of 26.4% from last year. There was a caveat on the internal cash flow, however.
An 11% drop in operating income to $3.9 billion from $4.42 billion indicates a rise in some costs. Sales and fulfillment costs took a bulk of this. They were mostly responsible for this increase as well.
These costs contributed to further expenses across Amazon’s value chains. Logistics, increased safety and human resource costs are examples of such augmentations. This also creates a gap between the actual value that Amazon delivers and the projected value it expects to deliver.
This gap, however, will be filled with a rise in Amazon Web Services (AWS) usage. The COVID-19 situation has brought an increase in cloud services. AWS is one of the major providers worldwide for cloud services. As the situation progresses, we are going to see a tremendous increase in cloud applications. AWS will get its share of the pie.
AWS is extremely critical to Amazon’s overall success. This was demonstrated in its performance last quarter. AWS generated $3.1 billion in operating income. This is a 38% Year-to-date increase. AWS holds a whopping 77% share in Amazon’s operating profit. Its contribution to the company’s revenue base though is still small (about 10%-12%).
AWS Is Market Leader
AWS holds the position of the top cloud services provider. It held a 32.4% global market share last year. Microsoft Corporation (NASDAQ: MSFT) with a 17.6% market share with Azure. Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary Google LLC was a distant third with about 6%.
This market is set to grow. AWS will grow with it as well. Amazon is expected to increase spending in this direction. Amazon’s world-class infrastructure is sure to contribute. The Bezos-led team’s pattern of focusing on profit drivers is another factor.
The pundits could be right on the money this time. Since cloud services are rising AWS will rise too.
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