Wall Street has recently expressed concerns about the slowing growth of Amazon.com Inc.’s AWS cloud-computing business. However, a new analysis disagrees with this outlook, stating that the current situation is temporary and driven by macro factors.
HSBC analyst Christopher Johnen believes that the recent de-rating of Amazon’s stock is unwarranted. He argues that the slowdown in AWS growth is due to customers optimizing their spending, which is actually a positive indicator for the cloud industry as a whole.
Johnen launched coverage of Amazon shares with a buy rating and set a target price of $160. He describes AWS as one of the most attractive stories in the tech sector and regards it as the “crown jewel” of Amazon’s portfolio.
The analyst emphasizes the importance of AWS, noting that only about 15% of workloads are currently in the cloud. This presents a significant growth opportunity for Amazon in the long term.
Amazon has been investing in its cloud business for 15 years, and according to Johnen, the breadth and depth of its services have made it a dominant player in the market. He also acknowledges the e-commerce business’s strong consumer lock-in effect but believes that the structural opportunity in cloud outweighs it.
Johnen acknowledges that fixing Amazon’s heavy pandemic buildout will take time, but he anticipates improved expense control in future quarters.
While Amazon’s stock has risen by 64% this year, it still hasn’t reached levels seen earlier in 2022.