AWS Could be Worth up to $50 Billion: Analysts

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This article originally appeared at The WHIR

Analysts at financial firm Robert W. Baird on Wednesday pegged the value of Amazon Web Services (AWS) at between $40 and $50 billion, TheStreet reports. The RW Baird analysis was done in anticipation of Amazon reporting AWS earnings as its own segment at the close of the quarter, the company revealed following its Q4 2014 report.

Analysts give AWS a value of about $95, and hiked their target for the overall share price from $380 to $425. They said that AWS could become a more important part of the company’s overall business, and generate $20 billion in revenue annually by 2020. For the sake of comparison, Rackspace is estimated to be worth around $7 billion.

Amazon CFO Tom Szkutak announced in the earnings call that AWS would be moved out of the “other” category, which it shared with advertising and credit-card related revenues, into its own segment, calling it “an appropriate way to look at our business in 2015.”

The new valuation puts AWS at over 20 percent of Amazon’s overall value, so it is possible that the change in reporting is driven by a concern for clarity around a major business segment. The company could have other motivations, too.

TheStreet notes that Amazon has a relatively high debt-to-equity ratio of 1.50, as well as potential short term cash problems. These concerns as well as the gap between Amazon’s retail core and AWS lead Codero Hosting CEO Emil Sayegh to see an AWS spin off or be sale in 2015 when he gazed into his crystal ball for the WHIR at the end of 2014.

It could also be a move to help the share price, which has lagged the S&P 500 over the past year, by increasing the visibility of a segment with strong growth.

It is a foregone conclusion that however well fortune treats the American consumers who drive Amazon’s retail business, AWS will grow in 2015. Industry perception of the infrastructure giant is changing as partnerships and opportunities from complementary services are realized. Its public cloud was called the most popular for enterprises, along with Azure, in a recent Rightscale report, and the “international” segment should benefit from further penetration into the Australian ecommerce market following a partnership with Anchor announced earlier this week.

Amazon stock was up slightly from a $385.61 open in early Thursday trading.

This article originally appeared at http://www.thewhir.com/web-hosting-news/aws-worth-50-billion-analysts