Why Amazon Shouldn’t Spin Off Its Giant Cloud Computing Business
#Amazon .com Inc.’s (AMZN) cloud computing unit, #AmazonWebServices, would be a formidable company on its own, but it might not make sense for Amazon to spin it out. AWS sales are on track to nearly triple from $12.2 billion in 2016 to $35.2 billion in 2020, Canaccord Genuity Inc. projects, with a compound annual growth rate of 30.2%. Keep in mind that cloud-centric #Salesforce.com Inc. (CRM) is still trying to crack $10 billion in annual sales. Canaccord Genuity estimates Amazon’s cloud unit is worth about 7.1 times revenue, or $162 billion. The firm uses a 1.3 times revenue multiple to value Amazon’s e-commerce business, which has substantially lower margins, at $234 billion. Adding #AWS and the e-commerce business, plus Amazon’s net cash, puts the company’s equity value at $440 billion. That comes to $860 per share versus Thursday’s close of $780.45.