Cloud Computing Could Be Big for Amazon.com
It would be no exaggeration to say that Amazon.com, Inc. (NASDAQ:AMZN) has posted a spectacular performance this year, with the AMZN stock price increasing by more than 100% in value since last year.
Overall, the company’s performance was driven by several key growth factors and financial earnings reports. But what has been the biggest key to the Amazon’s stock price success is the company’s strong performance across nearly all of its business categories. This includes merchandise sales and Amazon Web Services (AWS), the e-commerce giant’s cloud computing segment.
It now appears as if the $600.00 AMZN stock price target identified by analysts was conservative. In fact, the company has several positive upcoming developments that could cause the stock’s price to rise even further in 2016.
Amazon Stock Price Forecast: All Signs Point Up
Amazon’s success in the medium- to long-term will need continued strong performance in terms of profitability and maintained momentum from its cloud computing services. If the company can leverage its healthy financial position and ride the revenue wave provided by AWS, Amazon’s stock price could be set to skyrocket even more than it already has.
One of Amazon’s strengths is recognizing that long-term profitability trumps short-term gains. This is reflected in the strong investments it has made over the years in successful initiatives. While this is undoubtedly a good strategy, large publicly traded companies must also pay attention to short-term gains and financial results, because they impact the company’s stock price in a big way.
Because of its long-term focus, Amazon’s operating margins have fluctuated significantly over the years. For example, while Amazon’s operating margins were at 4.1% and 1.8% back in 2010 and 2011, respectively, this figure fell to 0.2% last year. (Source: “These Triggers Could Lead To Big Swings in Amazon’s Stock Price,” Forbes, November 24, 2015.) For 2015, however, Amazon’s operating margins again rose to about 1.6%, highlighting the fact that the company’s financial bottom line is often not a good indicator of how well it is performing.
Razor-thin margins often mean that the e-commerce giant is simply pouring money into initiatives that will pay off down the line, instead of padding its quarterly report.
Focusing on the future instead of limping from one quarter to another? Now that’s what I call a solid growth strategy.
If Amazon can continue its success with AWS, its stock price could absolutely soar, giving the company even more long-term stability. Recent estimates for future revenue from the company’s cloud computing services are more than bullish, being forecasted to grow to $55.0 billion by 2022. (Source: Ibid.)
Much of this enthusiasm is based on analyses of potential growth in cloud computing services in general, which are estimated to absolutely soar in the decade ahead. Given Amazon’s leadership role in this market, this could only be good news for AMZN stockholders.
The Bottom Line on AMZN Stock
Now, it’s obviously difficult to conclude with any certainty where the cloud services game will go, but the Amazon stock price could see higher days ahead on the charts if the company’s efforts, as outlined above, continue.
What Amazon’s management should be focusing on, if it wants to provide an uplift to the company’s stock price, is expanding individual partnerships with small-sized businesses, which create value-added services for AWS. Through working with the competition, rather than fighting against it, a more sound strategy can be formed with which the Amazon stock price could skyrocket in value.