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Technology Stocks : Investing in Exponential Growth
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Glenn Petersen
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From: Paul H. Christiansen3/15/2017 9:31:09 PM
2 Recommendations   of 1084
 
Amazon Web Services On Its Own Would Be The 6th Largest Public Company In U.S.



Based on this DCF model, the value of AWS as a standalone business is implied to be $377.8 billion, or 92% of Amazon's current market capitalization (note that Amazon's market value might not reflect its actual intrinsic value).

While this may seem overvalued at first (even with the fact that AWS accounts for 74% of Amazon's total operating profit), a review of the inputs used in this model shows that all the assumptions were conservative, which suggests that the $377.8 billion is actually the lower estimate of AWS's intrinsic value.

There are two possible implications of this result: 1) Amazon's retail business is only valued to be worth $32 billion by the market (unlikely scenario), or 2) AWS is significantly undervalued by the market.

Chamath Palihapitiya, CEO of the VC firm Social Capital, once commented that Amazon is a potential $3 trillion company and that AWS alone will be worth $1.5 trillion in 2025. It might have seemed unreasonable at that time, but now that there is enough information to actually calculate AWS's value, that number is suddenly a lot more convincing.

seekingalpha.com

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