Did Competition or Microsoft Lead to Amazon Stock’s Downgrade?



Amazon stock is downgraded

Earlier in this series, we discussed Microsoft’s (MSFT) increased initiatives and Azure’s role in the company’s improving position in the overall cloud space. Microsoft is behind only Amazon (AMZN) in the overall cloud space.

On March 17, 2017, Amazon stock was downgraded by Brent Bracelin, a senior research analyst with Pacific Crest Securities. Bracelin reduced the price target of Amazon stock from $905 to $895 per share. Although this is a slight reduction, it puts a question mark on Amazon’s dominance in the cloud space.

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March has been a challenging month for Amazon, first with the massive outage and then a stock downgrade. Neither the temporary glitch that the Amazon Web Services (or AWS) platform faced this month nor the company’s performance led to its downgrade. Instead, growing competition in the cloud space led to the downgrade. Bracelin noted, “Everyone has outages, even companies with internal data centers.”

Amazon’s AWS comparison with peers

Amazon rules the cloud space, with AWS’s market share at a whopping ~40%. AWS has ~$14 billion in annual revenues. In comparison, Microsoft’s Azure and Google’s (GOOG) cloud have ~$2.5 billion–$3.0 billion and $1.0 billion in annual revenues, respectively.

Sharing his views on Amazon’s growth in 2017 and 2018, Bracelin said, “We do see the pace of AWS share gains and growth moderating in 2017 and 2018.”


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