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2021-10-11
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Amazon: AWS - A Fine Business
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{"i18n":{"language":"zh_CN"},"userPageInfo":{"id":4096948984977630,"uuid":"4096948984977630","gmtCreate":1633847502287,"gmtModify":1633958187093,"name":"KTML","pinyin":"ktml","introduction":"","introductionEn":"","signature":"","avatar":"https://static.tigerbbs.com/bfaf6196b314ce281c3ede384c4ac94e","hat":null,"hatId":null,"hatName":null,"vip":1,"status":2,"fanSize":1,"headSize":3,"tweetSize":1,"questionSize":0,"limitLevel":999,"accountStatus":4,"level":{"id":1,"name":"萌萌虎","nameTw":"萌萌虎","represent":"呱呱坠地","factor":"评论帖子3次或发布1条主帖（非转发）","iconColor":"3C9E83","bgColor":"A2F1D9"},"themeCounts":0,"badgeCounts":0,"badges":[],"moderator":false,"superModerator":false,"manageSymbols":null,"badgeLevel":null,"boolIsFan":false,"boolIsHead":false,"favoriteSize":0,"symbols":null,"coverImage":null,"realNameVerified":null,"userBadges":[{"badgeId":"518b5610c3e8410da5cfad115e4b0f5a-1","templateUuid":"518b5610c3e8410da5cfad115e4b0f5a","name":"实盘交易者","description":"完成一笔实盘交易","bigImgUrl":"https://static.tigerbbs.com/2e08a1cc2087a1de93402c2c290fa65b","smallImgUrl":"https://static.tigerbbs.com/4504a6397ce1137932d56e5f4ce27166","grayImgUrl":"https://static.tigerbbs.com/4b22c79415b4cd6e3d8ebc4a0fa32604","redirectLinkEnabled":0,"redirectLink":null,"hasAllocated":1,"isWearing":0,"stamp":null,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2021.12.28","exceedPercentage":null,"individualDisplayEnabled":0,"backgroundColor":null,"fontColor":null,"individualDisplaySort":0,"categoryType":1100}],"userBadgeCount":1,"currentWearingBadge":null,"individualDisplayBadges":null,"crmLevel":4,"crmLevelSwitch":0,"location":"未知","starInvestorFollowerNum":0,"starInvestorFlag":false,"starInvestorOrderShareNum":0,"subscribeStarInvestorNum":0,"ror":null,"winRationPercentage":null,"showRor":false,"investmentPhilosophy":null,"starInvestorSubscribeFlag":false},"baikeInfo":{},"tab":"post","tweets":[{"id":826009312,"gmtCreate":1633954208673,"gmtModify":1633954208673,"author":{"id":"4096948984977630","authorId":"4096948984977630","name":"KTML","avatar":"https://static.tigerbbs.com/bfaf6196b314ce281c3ede384c4ac94e","crmLevel":4,"crmLevelSwitch":0,"followedFlag":false},"themes":[],"htmlText":"Nice","listText":"Nice","text":"Nice","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/826009312","repostId":"1126688744","repostType":4,"repost":{"id":"1126688744","pubTimestamp":1633945205,"share":"https://www.laohu8.com/m/news/1126688744?lang=&edition=full","pubTime":"2021-10-11 17:40","market":"us","language":"en","title":"Amazon: AWS - A Fine Business","url":"https://stock-news.laohu8.com/highlight/detail?id=1126688744","media":"Seeking Alpha","summary":"Summary\n\nNot many businesses had a 24% operating margin and y/y sales growth of 37% in the most rece","content":"<p><b>Summary</b></p>\n<ul>\n <li>Not many businesses had a 24% operating margin and y/y sales growth of 37% in the most recent quarter.</li>\n <li>Competitors are rational as the market is growing fast enough to keep all 3 hyperscale cloud companies happy.</li>\n <li>Google Cloud has cumulative losses of more than $16 billion so we probably won’t see new hyperscale competitors anytime soon.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8f144d7cd8cfb53ca8317500b4603e79\" tg-width=\"1536\" tg-height=\"1025\" width=\"100%\" height=\"auto\"><span>Sundry Photography/iStock Editorial via Getty Images</span></p>\n<p><b>Introduction</b></p>\n<p>My thesis is that AWS (AMZN) is a fine business. It is a solid bet that they will continue to thrive for many years to come.</p>\n<p><b>The Numbers</b></p>\n<p>It is mind-boggling what AWS has accomplished from 2017 to present:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/a52a35a50fa7632643e4a1f13317c521\" tg-width=\"676\" tg-height=\"742\" width=\"100%\" height=\"auto\"><span>Image Source: Author's spreadsheet from earnings releases.</span></p>\n<p>High y/y sales growth has been continuing for AWS despite a larger base. In other words, y/y quarterly sales growth was 37% back in 2Q19 and here today in 2Q21 it was also 37%.</p>\n<p>The y/y operating income growth continues to impress as well. It was 31% back in 2Q19 and it was 35% and 24% for quarters 1 and 2, respectively, of this year.</p>\n<p>The AWS operating margin has not been under 25% since 3Q17 and it's been as high as 31.5% in 2Q20.</p>\n<p><b>Competitive Landscape</b></p>\n<p>The cloud pie is growing so fast that AWS can continue doing extremely well even if their slice of the pie gets thinner depending on what happens with Microsoft (MSFT) Azure, Google (GOOG) (GOOGL) Cloud and others. Gartner says these 3 companies combine to have 2/3rds of the worldwide IaaS market share.</p>\n<p>Here are the operating losses over the years from Google Cloud:</p>\n<ul>\n <li>2018: $(4,348) million on sales of $5,838 million</li>\n <li>2019: $(4,645) million on sales of $8,918 million</li>\n <li>2020: $(5,607) million on sales of $13,059 million</li>\n <li>1H21: $(1,565) million on sales of $8,675 million</li>\n</ul>\n<p>Management at Google Cloud can assuage themselves seeing as they only lost $591 million on revenue of $4,628 million in 2Q21. Still, they have cumulative operating losses of $16.2 billion just in the last 3.5 years, not counting all the money lost before this time!</p>\n<p>Amazon's 1Q18 earnings release helps explain the importance of their head start:</p>\n<blockquote>\n \"AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,\" said Jeff Bezos, Amazon founder and CEO. \"As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That's why you're seeing this remarkable acceleration in AWS growth, now for two quarters in a row.\n</blockquote>\n<p>Not having to be concerned with Azure and Google Cloud in the early years, AWS didn't have a war for talent back then and they didn't have to worry about competitive pressure with pricing. AWS was not losing money years ago when they had the same sales levels that we see today at Google Cloud. Amazon's 2017 10-K filing shows the following for AWS operating income and sales:</p>\n<ul>\n <li>2015: $1,507 million on sales of $7,880 million</li>\n <li>2016: $3,108 million on sales of $12,219 million</li>\n <li>2017: $4,331 million on sales of $17,459 million</li>\n</ul>\n<p>I believe the bulk of the ex-China market will continue to be served by these 3 companies as it is now too expensive for new companies to reach meaningful size. Google has been able to subsidize losses in this area but other companies do not have the capital to become hyperscale cloud businesses at this point.</p>\n<p><b>AWS Marketplace</b></p>\n<p>Launched in 2012, AWS Marketplace has been in place for almost a decade. The Azure marketplace wasn't launched until 2.5 years later in 2014. The Google Cloud marketplace was first started as Google Cloud Launcher in 2015.</p>\n<p>AWS Marketplace has over 1,600 Independent Software Vendors (\"ISVs\"):</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/59eabdf24889e210851ba8f0f0b0f594\" tg-width=\"800\" tg-height=\"295\" width=\"100%\" height=\"auto\"><span>Image Source: AWS Marketplace</span></p>\n<p>Per a December 2020 writeup from AWS, their marketplace has <b>8,000 software listings</b>. This is a leading ecosystem that gives customers the tools they need to get the most out of their AWS environment. It is easy to see that AWS Marketplace gives them an edge when we consider that Salesforce (CRM) President & COO Bret Taylor has said AppExchange is one of their main competitive advantages with117,000 customer reviews and 9 million installs. AWS Marketplace helps drive the growth of their customer base in the same way that Shopify's (SHOP) partner ecosystem with 7,000 apps helps drive the growth of their merchant base.</p>\n<p>At the 65,000 person AWS re:Invent 2019 event, CEO Andy Jassy explains that ISVs prefer AWS Marketplace:</p>\n<blockquote>\n And so if you look at most ISVs and SaaS providers, they will adapt their technology infrastructure platform to work on a technology infrastructure platform. So they'll adapt their software to work on a technology infrastructure platform.\n <b>Some will do 2 [cloud marketplaces], very few will do 3. And they all start with AWS just because we have such a significant market segment leadership position. And it's why you see a much more vibrant collection of ISVs and SaaS providers on AWS as you're moving to the cloud and want those capabilities. And you see it with - Salesforce runs the vast majority of what they do on top of AWS</b> as does Workday and Splunk and Informatica and Infor and Acquia and Datadog and Databricks, just a much broader collection of software that when you're moving to the cloud, you can use really easily on top of our platform.\n</blockquote>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/91ef11b3883395db86835e036992e10a\" tg-width=\"1000\" tg-height=\"322\" width=\"100%\" height=\"auto\"><span>Image Source: AWS re:Invent 2019 event</span></p>\n<p><b>Subscription Economics</b></p>\n<p>Then Spotify (SPOT) CEO Barry McCarthy explained the advantages an older subscription business has over newer competitors at the March 2018 Investor Day presentation. If the services are equally liked, then the older company will have a lower overall average churn rate which means that the older company has a more efficient marketing spend because marketing dollars for the older company go towards new subscriber growth whereas marketing dollars for the newer competitor go towards replacing churn subs. This means AWS is advantaged to newer competitors like Azure and Google Cloud. If a new hyperscale competitor emerges, then these 3 are advantaged relative to the newcomer.</p>\n<p><b>Investments</b></p>\n<p>The February 2021 Cloud Table Stakes writeup by Charles Fitzgerald shows the way capital leases as a percentage of AWS revenue have dropped over the years. Fitzgerald notes that finance leases historically have reflected AWS server purchases:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/392a2bc941a00b86ec0996037f44e1dc\" tg-width=\"800\" tg-height=\"665\" width=\"100%\" height=\"auto\"><span>Image Source: February 2021 Cloud Table Stakes writeup by Charles Fitzgerald</span></p>\n<p>It's clear from the chart above that capital leases (\"AWS servers\") as a percentage of AWS revenue didn't permanently fall below 50% until the 2018 10-K filing which shows capital leases went from 55% of AWS revenue or $9,637 million of $17,459 million in 2017 down to 41% of AWS revenue or $10,615 of $25,655 million in 2018. This could be good news for Google Cloud if their servers as a percentage of revenue drop when they eventually get to $25 billion in annual sales.</p>\n<p><b>Management</b></p>\n<p>At re:Invent 2020, CEO Jassy talks about Netflix (NFLX) cannibalizing their DVD business with streaming and Amazon cannibalizing their first-party (\"1P\") business with a new third-party (\"3P\") marketplace business:</p>\n<blockquote>\n And what we started seeing was these companies like eBay and Half.com that were actually offering third-party sellers' products and they were shipping the products to customers. And we had this huge animated debate inside the company on whether or not we should support that. And the reasons that we were concerned about it were we just didn't believe anybody was going to take care of customers the same way that we did. And then also the whole culture was set up to be this owned inventory business. People worried, well if we worked with third-party sellers, how would our publishers or distributors feel? So it was a very hard decision but ultimately, we decided to build a marketplace and offer third-party sellers.\n</blockquote>\n<p>Apple (AAPL) CEO Tim Cook didn't need to be Steve Jobs in order for Apple to flourish. CEO Jassy may not ask the same type of trenchant questions as Jeff Bezos but I believe he is more than capable of making the right decisions at Amazon to maintain their culture of innovation.</p>\n<p><b>Valuation</b></p>\n<p>Of course it would be cursory if we only valued AWS and not the rest of the company.</p>\n<p>The 1P segment has a higher revenue growth rate than Costco(NASDAQ:COST)and they've already passed Costco in revenue. Costco's trailing-twelve-month (\"TTM\") revenue through August 2021 is $196 billion while Amazon's TTM 1P revenue through 2Q21 is $221 billion. Costco has a market cap of $200 billion which is close to their enterprise value. I think 1P is worth $225 to $300 billion.</p>\n<p>TTM 3P sales through 2Q21 are nearly $97B. Using a multiplier of 3.75 implies the GMV is nearly $362B. I think this is worth double 1P or $450 billion to $600 billion.</p>\n<p>TTM Other/Ad sales through 2Q21 are over $28 billion. Facebook (FB) had revenue of $27.6 billion in FY16 and the market cap for Facebook was between $350B and $400B in early 2017.</p>\n<p>TTM AWS sales through 2Q21 are nearly $53 billion and AWS operating income for the same period is $15.5 billion. I think AWS is worth 30 to 40 times operating income or $465 billion to $620 billion.</p>\n<p>I also think there is $100 to $150 billion in opaque considerations like a new business that is a UPS(NYSE:UPS)/FedEx(NYSE:FDX)competitor. It's also possible that Amazon could do more with healthcare and prescriptions in the coming years.</p>\n<p>Here is my valuation summary:</p>\n<p>$225 to $300 billion 1P, physical stores and subscription</p>\n<p>$450 to $600 billion 3P</p>\n<p>$350 to $400 billion other/advertising</p>\n<p>$465 to $620 billion AWS</p>\n<p>$100 to $150 billion opaque considerations</p>\n<p>--------------------------------</p>\n<p>$1.6 to $2.1 trillion</p>\n<p>This compares nicely to their enterprise value which is close to their market cap of $1.7 trillion based on the October 8th share price of $3,288.62 and the 506,440,520 shares outstanding as July 21, 2021.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Amazon: AWS - A Fine Business</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAmazon: AWS - A Fine Business\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-10-11 17:40 GMT+8 <a href=https://seekingalpha.com/article/4459232-amazon-aws-marketplace-cloud-fine-business><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nNot many businesses had a 24% operating margin and y/y sales growth of 37% in the most recent quarter.\nCompetitors are rational as the market is growing fast enough to keep all 3 hyperscale ...</p>\n\n<a href=\"https://seekingalpha.com/article/4459232-amazon-aws-marketplace-cloud-fine-business\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"AMZN":"亚马逊"},"source_url":"https://seekingalpha.com/article/4459232-amazon-aws-marketplace-cloud-fine-business","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1126688744","content_text":"Summary\n\nNot many businesses had a 24% operating margin and y/y sales growth of 37% in the most recent quarter.\nCompetitors are rational as the market is growing fast enough to keep all 3 hyperscale cloud companies happy.\nGoogle Cloud has cumulative losses of more than $16 billion so we probably won’t see new hyperscale competitors anytime soon.\n\nSundry Photography/iStock Editorial via Getty Images\nIntroduction\nMy thesis is that AWS (AMZN) is a fine business. It is a solid bet that they will continue to thrive for many years to come.\nThe Numbers\nIt is mind-boggling what AWS has accomplished from 2017 to present:\nImage Source: Author's spreadsheet from earnings releases.\nHigh y/y sales growth has been continuing for AWS despite a larger base. In other words, y/y quarterly sales growth was 37% back in 2Q19 and here today in 2Q21 it was also 37%.\nThe y/y operating income growth continues to impress as well. It was 31% back in 2Q19 and it was 35% and 24% for quarters 1 and 2, respectively, of this year.\nThe AWS operating margin has not been under 25% since 3Q17 and it's been as high as 31.5% in 2Q20.\nCompetitive Landscape\nThe cloud pie is growing so fast that AWS can continue doing extremely well even if their slice of the pie gets thinner depending on what happens with Microsoft (MSFT) Azure, Google (GOOG) (GOOGL) Cloud and others. Gartner says these 3 companies combine to have 2/3rds of the worldwide IaaS market share.\nHere are the operating losses over the years from Google Cloud:\n\n2018: $(4,348) million on sales of $5,838 million\n2019: $(4,645) million on sales of $8,918 million\n2020: $(5,607) million on sales of $13,059 million\n1H21: $(1,565) million on sales of $8,675 million\n\nManagement at Google Cloud can assuage themselves seeing as they only lost $591 million on revenue of $4,628 million in 2Q21. Still, they have cumulative operating losses of $16.2 billion just in the last 3.5 years, not counting all the money lost before this time!\nAmazon's 1Q18 earnings release helps explain the importance of their head start:\n\n \"AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,\" said Jeff Bezos, Amazon founder and CEO. \"As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That's why you're seeing this remarkable acceleration in AWS growth, now for two quarters in a row.\n\nNot having to be concerned with Azure and Google Cloud in the early years, AWS didn't have a war for talent back then and they didn't have to worry about competitive pressure with pricing. AWS was not losing money years ago when they had the same sales levels that we see today at Google Cloud. Amazon's 2017 10-K filing shows the following for AWS operating income and sales:\n\n2015: $1,507 million on sales of $7,880 million\n2016: $3,108 million on sales of $12,219 million\n2017: $4,331 million on sales of $17,459 million\n\nI believe the bulk of the ex-China market will continue to be served by these 3 companies as it is now too expensive for new companies to reach meaningful size. Google has been able to subsidize losses in this area but other companies do not have the capital to become hyperscale cloud businesses at this point.\nAWS Marketplace\nLaunched in 2012, AWS Marketplace has been in place for almost a decade. The Azure marketplace wasn't launched until 2.5 years later in 2014. The Google Cloud marketplace was first started as Google Cloud Launcher in 2015.\nAWS Marketplace has over 1,600 Independent Software Vendors (\"ISVs\"):\nImage Source: AWS Marketplace\nPer a December 2020 writeup from AWS, their marketplace has 8,000 software listings. This is a leading ecosystem that gives customers the tools they need to get the most out of their AWS environment. It is easy to see that AWS Marketplace gives them an edge when we consider that Salesforce (CRM) President & COO Bret Taylor has said AppExchange is one of their main competitive advantages with117,000 customer reviews and 9 million installs. AWS Marketplace helps drive the growth of their customer base in the same way that Shopify's (SHOP) partner ecosystem with 7,000 apps helps drive the growth of their merchant base.\nAt the 65,000 person AWS re:Invent 2019 event, CEO Andy Jassy explains that ISVs prefer AWS Marketplace:\n\n And so if you look at most ISVs and SaaS providers, they will adapt their technology infrastructure platform to work on a technology infrastructure platform. So they'll adapt their software to work on a technology infrastructure platform.\n Some will do 2 [cloud marketplaces], very few will do 3. And they all start with AWS just because we have such a significant market segment leadership position. And it's why you see a much more vibrant collection of ISVs and SaaS providers on AWS as you're moving to the cloud and want those capabilities. And you see it with - Salesforce runs the vast majority of what they do on top of AWS as does Workday and Splunk and Informatica and Infor and Acquia and Datadog and Databricks, just a much broader collection of software that when you're moving to the cloud, you can use really easily on top of our platform.\n\nImage Source: AWS re:Invent 2019 event\nSubscription Economics\nThen Spotify (SPOT) CEO Barry McCarthy explained the advantages an older subscription business has over newer competitors at the March 2018 Investor Day presentation. If the services are equally liked, then the older company will have a lower overall average churn rate which means that the older company has a more efficient marketing spend because marketing dollars for the older company go towards new subscriber growth whereas marketing dollars for the newer competitor go towards replacing churn subs. This means AWS is advantaged to newer competitors like Azure and Google Cloud. If a new hyperscale competitor emerges, then these 3 are advantaged relative to the newcomer.\nInvestments\nThe February 2021 Cloud Table Stakes writeup by Charles Fitzgerald shows the way capital leases as a percentage of AWS revenue have dropped over the years. Fitzgerald notes that finance leases historically have reflected AWS server purchases:\nImage Source: February 2021 Cloud Table Stakes writeup by Charles Fitzgerald\nIt's clear from the chart above that capital leases (\"AWS servers\") as a percentage of AWS revenue didn't permanently fall below 50% until the 2018 10-K filing which shows capital leases went from 55% of AWS revenue or $9,637 million of $17,459 million in 2017 down to 41% of AWS revenue or $10,615 of $25,655 million in 2018. This could be good news for Google Cloud if their servers as a percentage of revenue drop when they eventually get to $25 billion in annual sales.\nManagement\nAt re:Invent 2020, CEO Jassy talks about Netflix (NFLX) cannibalizing their DVD business with streaming and Amazon cannibalizing their first-party (\"1P\") business with a new third-party (\"3P\") marketplace business:\n\n And what we started seeing was these companies like eBay and Half.com that were actually offering third-party sellers' products and they were shipping the products to customers. And we had this huge animated debate inside the company on whether or not we should support that. And the reasons that we were concerned about it were we just didn't believe anybody was going to take care of customers the same way that we did. And then also the whole culture was set up to be this owned inventory business. People worried, well if we worked with third-party sellers, how would our publishers or distributors feel? So it was a very hard decision but ultimately, we decided to build a marketplace and offer third-party sellers.\n\nApple (AAPL) CEO Tim Cook didn't need to be Steve Jobs in order for Apple to flourish. CEO Jassy may not ask the same type of trenchant questions as Jeff Bezos but I believe he is more than capable of making the right decisions at Amazon to maintain their culture of innovation.\nValuation\nOf course it would be cursory if we only valued AWS and not the rest of the company.\nThe 1P segment has a higher revenue growth rate than Costco(NASDAQ:COST)and they've already passed Costco in revenue. Costco's trailing-twelve-month (\"TTM\") revenue through August 2021 is $196 billion while Amazon's TTM 1P revenue through 2Q21 is $221 billion. Costco has a market cap of $200 billion which is close to their enterprise value. I think 1P is worth $225 to $300 billion.\nTTM 3P sales through 2Q21 are nearly $97B. Using a multiplier of 3.75 implies the GMV is nearly $362B. I think this is worth double 1P or $450 billion to $600 billion.\nTTM Other/Ad sales through 2Q21 are over $28 billion. Facebook (FB) had revenue of $27.6 billion in FY16 and the market cap for Facebook was between $350B and $400B in early 2017.\nTTM AWS sales through 2Q21 are nearly $53 billion and AWS operating income for the same period is $15.5 billion. I think AWS is worth 30 to 40 times operating income or $465 billion to $620 billion.\nI also think there is $100 to $150 billion in opaque considerations like a new business that is a UPS(NYSE:UPS)/FedEx(NYSE:FDX)competitor. It's also possible that Amazon could do more with healthcare and prescriptions in the coming years.\nHere is my valuation summary:\n$225 to $300 billion 1P, physical stores and subscription\n$450 to $600 billion 3P\n$350 to $400 billion other/advertising\n$465 to $620 billion AWS\n$100 to $150 billion opaque considerations\n--------------------------------\n$1.6 to $2.1 trillion\nThis compares nicely to their enterprise value which is close to their market cap of $1.7 trillion based on the October 8th share price of $3,288.62 and the 506,440,520 shares outstanding as July 21, 2021.","news_type":1},"isVote":1,"tweetType":1,"viewCount":75,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"CN","totalScore":0}],"hots":[{"id":826009312,"gmtCreate":1633954208673,"gmtModify":1633954208673,"author":{"id":"4096948984977630","authorId":"4096948984977630","name":"KTML","avatar":"https://static.tigerbbs.com/bfaf6196b314ce281c3ede384c4ac94e","crmLevel":4,"crmLevelSwitch":0,"followedFlag":false},"themes":[],"htmlText":"Nice","listText":"Nice","text":"Nice","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/826009312","repostId":"1126688744","repostType":4,"repost":{"id":"1126688744","pubTimestamp":1633945205,"share":"https://www.laohu8.com/m/news/1126688744?lang=&edition=full","pubTime":"2021-10-11 17:40","market":"us","language":"en","title":"Amazon: AWS - A Fine Business","url":"https://stock-news.laohu8.com/highlight/detail?id=1126688744","media":"Seeking Alpha","summary":"Summary\n\nNot many businesses had a 24% operating margin and y/y sales growth of 37% in the most rece","content":"<p><b>Summary</b></p>\n<ul>\n <li>Not many businesses had a 24% operating margin and y/y sales growth of 37% in the most recent quarter.</li>\n <li>Competitors are rational as the market is growing fast enough to keep all 3 hyperscale cloud companies happy.</li>\n <li>Google Cloud has cumulative losses of more than $16 billion so we probably won’t see new hyperscale competitors anytime soon.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8f144d7cd8cfb53ca8317500b4603e79\" tg-width=\"1536\" tg-height=\"1025\" width=\"100%\" height=\"auto\"><span>Sundry Photography/iStock Editorial via Getty Images</span></p>\n<p><b>Introduction</b></p>\n<p>My thesis is that AWS (AMZN) is a fine business. It is a solid bet that they will continue to thrive for many years to come.</p>\n<p><b>The Numbers</b></p>\n<p>It is mind-boggling what AWS has accomplished from 2017 to present:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/a52a35a50fa7632643e4a1f13317c521\" tg-width=\"676\" tg-height=\"742\" width=\"100%\" height=\"auto\"><span>Image Source: Author's spreadsheet from earnings releases.</span></p>\n<p>High y/y sales growth has been continuing for AWS despite a larger base. In other words, y/y quarterly sales growth was 37% back in 2Q19 and here today in 2Q21 it was also 37%.</p>\n<p>The y/y operating income growth continues to impress as well. It was 31% back in 2Q19 and it was 35% and 24% for quarters 1 and 2, respectively, of this year.</p>\n<p>The AWS operating margin has not been under 25% since 3Q17 and it's been as high as 31.5% in 2Q20.</p>\n<p><b>Competitive Landscape</b></p>\n<p>The cloud pie is growing so fast that AWS can continue doing extremely well even if their slice of the pie gets thinner depending on what happens with Microsoft (MSFT) Azure, Google (GOOG) (GOOGL) Cloud and others. Gartner says these 3 companies combine to have 2/3rds of the worldwide IaaS market share.</p>\n<p>Here are the operating losses over the years from Google Cloud:</p>\n<ul>\n <li>2018: $(4,348) million on sales of $5,838 million</li>\n <li>2019: $(4,645) million on sales of $8,918 million</li>\n <li>2020: $(5,607) million on sales of $13,059 million</li>\n <li>1H21: $(1,565) million on sales of $8,675 million</li>\n</ul>\n<p>Management at Google Cloud can assuage themselves seeing as they only lost $591 million on revenue of $4,628 million in 2Q21. Still, they have cumulative operating losses of $16.2 billion just in the last 3.5 years, not counting all the money lost before this time!</p>\n<p>Amazon's 1Q18 earnings release helps explain the importance of their head start:</p>\n<blockquote>\n \"AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,\" said Jeff Bezos, Amazon founder and CEO. \"As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That's why you're seeing this remarkable acceleration in AWS growth, now for two quarters in a row.\n</blockquote>\n<p>Not having to be concerned with Azure and Google Cloud in the early years, AWS didn't have a war for talent back then and they didn't have to worry about competitive pressure with pricing. AWS was not losing money years ago when they had the same sales levels that we see today at Google Cloud. Amazon's 2017 10-K filing shows the following for AWS operating income and sales:</p>\n<ul>\n <li>2015: $1,507 million on sales of $7,880 million</li>\n <li>2016: $3,108 million on sales of $12,219 million</li>\n <li>2017: $4,331 million on sales of $17,459 million</li>\n</ul>\n<p>I believe the bulk of the ex-China market will continue to be served by these 3 companies as it is now too expensive for new companies to reach meaningful size. Google has been able to subsidize losses in this area but other companies do not have the capital to become hyperscale cloud businesses at this point.</p>\n<p><b>AWS Marketplace</b></p>\n<p>Launched in 2012, AWS Marketplace has been in place for almost a decade. The Azure marketplace wasn't launched until 2.5 years later in 2014. The Google Cloud marketplace was first started as Google Cloud Launcher in 2015.</p>\n<p>AWS Marketplace has over 1,600 Independent Software Vendors (\"ISVs\"):</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/59eabdf24889e210851ba8f0f0b0f594\" tg-width=\"800\" tg-height=\"295\" width=\"100%\" height=\"auto\"><span>Image Source: AWS Marketplace</span></p>\n<p>Per a December 2020 writeup from AWS, their marketplace has <b>8,000 software listings</b>. This is a leading ecosystem that gives customers the tools they need to get the most out of their AWS environment. It is easy to see that AWS Marketplace gives them an edge when we consider that Salesforce (CRM) President & COO Bret Taylor has said AppExchange is one of their main competitive advantages with117,000 customer reviews and 9 million installs. AWS Marketplace helps drive the growth of their customer base in the same way that Shopify's (SHOP) partner ecosystem with 7,000 apps helps drive the growth of their merchant base.</p>\n<p>At the 65,000 person AWS re:Invent 2019 event, CEO Andy Jassy explains that ISVs prefer AWS Marketplace:</p>\n<blockquote>\n And so if you look at most ISVs and SaaS providers, they will adapt their technology infrastructure platform to work on a technology infrastructure platform. So they'll adapt their software to work on a technology infrastructure platform.\n <b>Some will do 2 [cloud marketplaces], very few will do 3. And they all start with AWS just because we have such a significant market segment leadership position. And it's why you see a much more vibrant collection of ISVs and SaaS providers on AWS as you're moving to the cloud and want those capabilities. And you see it with - Salesforce runs the vast majority of what they do on top of AWS</b> as does Workday and Splunk and Informatica and Infor and Acquia and Datadog and Databricks, just a much broader collection of software that when you're moving to the cloud, you can use really easily on top of our platform.\n</blockquote>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/91ef11b3883395db86835e036992e10a\" tg-width=\"1000\" tg-height=\"322\" width=\"100%\" height=\"auto\"><span>Image Source: AWS re:Invent 2019 event</span></p>\n<p><b>Subscription Economics</b></p>\n<p>Then Spotify (SPOT) CEO Barry McCarthy explained the advantages an older subscription business has over newer competitors at the March 2018 Investor Day presentation. If the services are equally liked, then the older company will have a lower overall average churn rate which means that the older company has a more efficient marketing spend because marketing dollars for the older company go towards new subscriber growth whereas marketing dollars for the newer competitor go towards replacing churn subs. This means AWS is advantaged to newer competitors like Azure and Google Cloud. If a new hyperscale competitor emerges, then these 3 are advantaged relative to the newcomer.</p>\n<p><b>Investments</b></p>\n<p>The February 2021 Cloud Table Stakes writeup by Charles Fitzgerald shows the way capital leases as a percentage of AWS revenue have dropped over the years. Fitzgerald notes that finance leases historically have reflected AWS server purchases:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/392a2bc941a00b86ec0996037f44e1dc\" tg-width=\"800\" tg-height=\"665\" width=\"100%\" height=\"auto\"><span>Image Source: February 2021 Cloud Table Stakes writeup by Charles Fitzgerald</span></p>\n<p>It's clear from the chart above that capital leases (\"AWS servers\") as a percentage of AWS revenue didn't permanently fall below 50% until the 2018 10-K filing which shows capital leases went from 55% of AWS revenue or $9,637 million of $17,459 million in 2017 down to 41% of AWS revenue or $10,615 of $25,655 million in 2018. This could be good news for Google Cloud if their servers as a percentage of revenue drop when they eventually get to $25 billion in annual sales.</p>\n<p><b>Management</b></p>\n<p>At re:Invent 2020, CEO Jassy talks about Netflix (NFLX) cannibalizing their DVD business with streaming and Amazon cannibalizing their first-party (\"1P\") business with a new third-party (\"3P\") marketplace business:</p>\n<blockquote>\n And what we started seeing was these companies like eBay and Half.com that were actually offering third-party sellers' products and they were shipping the products to customers. And we had this huge animated debate inside the company on whether or not we should support that. And the reasons that we were concerned about it were we just didn't believe anybody was going to take care of customers the same way that we did. And then also the whole culture was set up to be this owned inventory business. People worried, well if we worked with third-party sellers, how would our publishers or distributors feel? So it was a very hard decision but ultimately, we decided to build a marketplace and offer third-party sellers.\n</blockquote>\n<p>Apple (AAPL) CEO Tim Cook didn't need to be Steve Jobs in order for Apple to flourish. CEO Jassy may not ask the same type of trenchant questions as Jeff Bezos but I believe he is more than capable of making the right decisions at Amazon to maintain their culture of innovation.</p>\n<p><b>Valuation</b></p>\n<p>Of course it would be cursory if we only valued AWS and not the rest of the company.</p>\n<p>The 1P segment has a higher revenue growth rate than Costco(NASDAQ:COST)and they've already passed Costco in revenue. Costco's trailing-twelve-month (\"TTM\") revenue through August 2021 is $196 billion while Amazon's TTM 1P revenue through 2Q21 is $221 billion. Costco has a market cap of $200 billion which is close to their enterprise value. I think 1P is worth $225 to $300 billion.</p>\n<p>TTM 3P sales through 2Q21 are nearly $97B. Using a multiplier of 3.75 implies the GMV is nearly $362B. I think this is worth double 1P or $450 billion to $600 billion.</p>\n<p>TTM Other/Ad sales through 2Q21 are over $28 billion. Facebook (FB) had revenue of $27.6 billion in FY16 and the market cap for Facebook was between $350B and $400B in early 2017.</p>\n<p>TTM AWS sales through 2Q21 are nearly $53 billion and AWS operating income for the same period is $15.5 billion. I think AWS is worth 30 to 40 times operating income or $465 billion to $620 billion.</p>\n<p>I also think there is $100 to $150 billion in opaque considerations like a new business that is a UPS(NYSE:UPS)/FedEx(NYSE:FDX)competitor. It's also possible that Amazon could do more with healthcare and prescriptions in the coming years.</p>\n<p>Here is my valuation summary:</p>\n<p>$225 to $300 billion 1P, physical stores and subscription</p>\n<p>$450 to $600 billion 3P</p>\n<p>$350 to $400 billion other/advertising</p>\n<p>$465 to $620 billion AWS</p>\n<p>$100 to $150 billion opaque considerations</p>\n<p>--------------------------------</p>\n<p>$1.6 to $2.1 trillion</p>\n<p>This compares nicely to their enterprise value which is close to their market cap of $1.7 trillion based on the October 8th share price of $3,288.62 and the 506,440,520 shares outstanding as July 21, 2021.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Amazon: AWS - A Fine Business</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAmazon: AWS - A Fine Business\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-10-11 17:40 GMT+8 <a href=https://seekingalpha.com/article/4459232-amazon-aws-marketplace-cloud-fine-business><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nNot many businesses had a 24% operating margin and y/y sales growth of 37% in the most recent quarter.\nCompetitors are rational as the market is growing fast enough to keep all 3 hyperscale ...</p>\n\n<a href=\"https://seekingalpha.com/article/4459232-amazon-aws-marketplace-cloud-fine-business\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"AMZN":"亚马逊"},"source_url":"https://seekingalpha.com/article/4459232-amazon-aws-marketplace-cloud-fine-business","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1126688744","content_text":"Summary\n\nNot many businesses had a 24% operating margin and y/y sales growth of 37% in the most recent quarter.\nCompetitors are rational as the market is growing fast enough to keep all 3 hyperscale cloud companies happy.\nGoogle Cloud has cumulative losses of more than $16 billion so we probably won’t see new hyperscale competitors anytime soon.\n\nSundry Photography/iStock Editorial via Getty Images\nIntroduction\nMy thesis is that AWS (AMZN) is a fine business. It is a solid bet that they will continue to thrive for many years to come.\nThe Numbers\nIt is mind-boggling what AWS has accomplished from 2017 to present:\nImage Source: Author's spreadsheet from earnings releases.\nHigh y/y sales growth has been continuing for AWS despite a larger base. In other words, y/y quarterly sales growth was 37% back in 2Q19 and here today in 2Q21 it was also 37%.\nThe y/y operating income growth continues to impress as well. It was 31% back in 2Q19 and it was 35% and 24% for quarters 1 and 2, respectively, of this year.\nThe AWS operating margin has not been under 25% since 3Q17 and it's been as high as 31.5% in 2Q20.\nCompetitive Landscape\nThe cloud pie is growing so fast that AWS can continue doing extremely well even if their slice of the pie gets thinner depending on what happens with Microsoft (MSFT) Azure, Google (GOOG) (GOOGL) Cloud and others. Gartner says these 3 companies combine to have 2/3rds of the worldwide IaaS market share.\nHere are the operating losses over the years from Google Cloud:\n\n2018: $(4,348) million on sales of $5,838 million\n2019: $(4,645) million on sales of $8,918 million\n2020: $(5,607) million on sales of $13,059 million\n1H21: $(1,565) million on sales of $8,675 million\n\nManagement at Google Cloud can assuage themselves seeing as they only lost $591 million on revenue of $4,628 million in 2Q21. Still, they have cumulative operating losses of $16.2 billion just in the last 3.5 years, not counting all the money lost before this time!\nAmazon's 1Q18 earnings release helps explain the importance of their head start:\n\n \"AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,\" said Jeff Bezos, Amazon founder and CEO. \"As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That's why you're seeing this remarkable acceleration in AWS growth, now for two quarters in a row.\n\nNot having to be concerned with Azure and Google Cloud in the early years, AWS didn't have a war for talent back then and they didn't have to worry about competitive pressure with pricing. AWS was not losing money years ago when they had the same sales levels that we see today at Google Cloud. Amazon's 2017 10-K filing shows the following for AWS operating income and sales:\n\n2015: $1,507 million on sales of $7,880 million\n2016: $3,108 million on sales of $12,219 million\n2017: $4,331 million on sales of $17,459 million\n\nI believe the bulk of the ex-China market will continue to be served by these 3 companies as it is now too expensive for new companies to reach meaningful size. Google has been able to subsidize losses in this area but other companies do not have the capital to become hyperscale cloud businesses at this point.\nAWS Marketplace\nLaunched in 2012, AWS Marketplace has been in place for almost a decade. The Azure marketplace wasn't launched until 2.5 years later in 2014. The Google Cloud marketplace was first started as Google Cloud Launcher in 2015.\nAWS Marketplace has over 1,600 Independent Software Vendors (\"ISVs\"):\nImage Source: AWS Marketplace\nPer a December 2020 writeup from AWS, their marketplace has 8,000 software listings. This is a leading ecosystem that gives customers the tools they need to get the most out of their AWS environment. It is easy to see that AWS Marketplace gives them an edge when we consider that Salesforce (CRM) President & COO Bret Taylor has said AppExchange is one of their main competitive advantages with117,000 customer reviews and 9 million installs. AWS Marketplace helps drive the growth of their customer base in the same way that Shopify's (SHOP) partner ecosystem with 7,000 apps helps drive the growth of their merchant base.\nAt the 65,000 person AWS re:Invent 2019 event, CEO Andy Jassy explains that ISVs prefer AWS Marketplace:\n\n And so if you look at most ISVs and SaaS providers, they will adapt their technology infrastructure platform to work on a technology infrastructure platform. So they'll adapt their software to work on a technology infrastructure platform.\n Some will do 2 [cloud marketplaces], very few will do 3. And they all start with AWS just because we have such a significant market segment leadership position. And it's why you see a much more vibrant collection of ISVs and SaaS providers on AWS as you're moving to the cloud and want those capabilities. And you see it with - Salesforce runs the vast majority of what they do on top of AWS as does Workday and Splunk and Informatica and Infor and Acquia and Datadog and Databricks, just a much broader collection of software that when you're moving to the cloud, you can use really easily on top of our platform.\n\nImage Source: AWS re:Invent 2019 event\nSubscription Economics\nThen Spotify (SPOT) CEO Barry McCarthy explained the advantages an older subscription business has over newer competitors at the March 2018 Investor Day presentation. If the services are equally liked, then the older company will have a lower overall average churn rate which means that the older company has a more efficient marketing spend because marketing dollars for the older company go towards new subscriber growth whereas marketing dollars for the newer competitor go towards replacing churn subs. This means AWS is advantaged to newer competitors like Azure and Google Cloud. If a new hyperscale competitor emerges, then these 3 are advantaged relative to the newcomer.\nInvestments\nThe February 2021 Cloud Table Stakes writeup by Charles Fitzgerald shows the way capital leases as a percentage of AWS revenue have dropped over the years. Fitzgerald notes that finance leases historically have reflected AWS server purchases:\nImage Source: February 2021 Cloud Table Stakes writeup by Charles Fitzgerald\nIt's clear from the chart above that capital leases (\"AWS servers\") as a percentage of AWS revenue didn't permanently fall below 50% until the 2018 10-K filing which shows capital leases went from 55% of AWS revenue or $9,637 million of $17,459 million in 2017 down to 41% of AWS revenue or $10,615 of $25,655 million in 2018. This could be good news for Google Cloud if their servers as a percentage of revenue drop when they eventually get to $25 billion in annual sales.\nManagement\nAt re:Invent 2020, CEO Jassy talks about Netflix (NFLX) cannibalizing their DVD business with streaming and Amazon cannibalizing their first-party (\"1P\") business with a new third-party (\"3P\") marketplace business:\n\n And what we started seeing was these companies like eBay and Half.com that were actually offering third-party sellers' products and they were shipping the products to customers. And we had this huge animated debate inside the company on whether or not we should support that. And the reasons that we were concerned about it were we just didn't believe anybody was going to take care of customers the same way that we did. And then also the whole culture was set up to be this owned inventory business. People worried, well if we worked with third-party sellers, how would our publishers or distributors feel? So it was a very hard decision but ultimately, we decided to build a marketplace and offer third-party sellers.\n\nApple (AAPL) CEO Tim Cook didn't need to be Steve Jobs in order for Apple to flourish. CEO Jassy may not ask the same type of trenchant questions as Jeff Bezos but I believe he is more than capable of making the right decisions at Amazon to maintain their culture of innovation.\nValuation\nOf course it would be cursory if we only valued AWS and not the rest of the company.\nThe 1P segment has a higher revenue growth rate than Costco(NASDAQ:COST)and they've already passed Costco in revenue. Costco's trailing-twelve-month (\"TTM\") revenue through August 2021 is $196 billion while Amazon's TTM 1P revenue through 2Q21 is $221 billion. Costco has a market cap of $200 billion which is close to their enterprise value. I think 1P is worth $225 to $300 billion.\nTTM 3P sales through 2Q21 are nearly $97B. Using a multiplier of 3.75 implies the GMV is nearly $362B. I think this is worth double 1P or $450 billion to $600 billion.\nTTM Other/Ad sales through 2Q21 are over $28 billion. Facebook (FB) had revenue of $27.6 billion in FY16 and the market cap for Facebook was between $350B and $400B in early 2017.\nTTM AWS sales through 2Q21 are nearly $53 billion and AWS operating income for the same period is $15.5 billion. I think AWS is worth 30 to 40 times operating income or $465 billion to $620 billion.\nI also think there is $100 to $150 billion in opaque considerations like a new business that is a UPS(NYSE:UPS)/FedEx(NYSE:FDX)competitor. It's also possible that Amazon could do more with healthcare and prescriptions in the coming years.\nHere is my valuation summary:\n$225 to $300 billion 1P, physical stores and subscription\n$450 to $600 billion 3P\n$350 to $400 billion other/advertising\n$465 to $620 billion AWS\n$100 to $150 billion opaque considerations\n--------------------------------\n$1.6 to $2.1 trillion\nThis compares nicely to their enterprise value which is close to their market cap of $1.7 trillion based on the October 8th share price of $3,288.62 and the 506,440,520 shares outstanding as July 21, 2021.","news_type":1},"isVote":1,"tweetType":1,"viewCount":75,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"CN","totalScore":0}],"lives":[]}
