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  • thedeathrace thedeathrace Apr 30, 2013 10:38 AM Flag

    AMZN's problem is clear....The Cloud business is losing big market share to Microsoft

    I was long confused my AMZN's ridiculous stock price and how could a profitless "retailer" trade at such a huge valuation. Well, the retail business does have a great deal of value, but not what the stock price indicates. The primo valuation has been given to AMZN because of its "Cloud" business, which has grown rapidly and has the largest market share in the industry. This is a very high p/e business due to its growth rate and investor enthusiasm over the sector. AMZN's cloud business has not however helped much with AMZN's overall profits. Now, Microsoft has attacked this market with a vengeance and is taking away huge market shares. MSFT has already captured 25% share and analysts say that this figure is going to 35% pronto. This is a huge negative for AMZN and positive for MSFT. Look at the two stock prices. MSFT isn't going up because of its PC activities.

    Now AMZN will be losing its primo rating and valuation from the cloud sector. The retail business while growing does not provide much support for the share price. This story is unfolding rapidly, but like APPL and Samsung, it will take several months to full play out. Over that time, look for AMZN shares to take a beating.

    Sentiment: Sell

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