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Amazon (AMZN) to Open Infrastructure Location in Colombia

Zacks Equity Research

Amazon.com Inc.’s AMZN cloud computing unit, Amazon Web Services (AWS) recently announced that it plans to open a Latin America infrastructure location in Colombia.

Further, the company plans to train approximately 2,000 students in cloud technology. The center is expected to provide data, videos and applications at a very high speed.

The latest move underscores Amazon’s two basic strategies of continual international expansion and increased focus on expanding cloud revenues.

Back Story

Last August, the company announced that it plans to open a customer service center in Bogota, Colombia, in a bid to ensure continuous service to customers.

The company said that the new center will fulfill customer service needs in Spanish, English, and Portuguese. In this regard, the online giant also plans to hire 600 employees, with job opportunities ranging from customer service to administration.

AWS Gaining Traction

Per a report from Gartner, the global cloud market is expected to reach $206.2 billion in 2019, reflecting year-over-year growth of 17.3% from 2018.

Notably, Amazon is capable enough to reap benefits from this rapidly growing market with the aid of its high-margin AWS, which generated $7.43 billion revenues in the last reported quarter and improved 45.3% on a year-over-year basis. This can be attributed to its strong customer base and reliable services.

The service is benefiting from rapid adoption rate and popularity. Amazon’s strategy to offer significant discounts for long-term deals is helping it win new customers. AWS generates significantly higher margins compared to the traditional retail business, which largely contributes to Amazon’s profits.

International Expansions — Key Catalyst

In a bid to maintain supremacy, Amazon has been expanding on a global basis. It is gaining an upper hand in this regard due to aggressive investment strategy. The company is solidifying its position with delivery and logistics-related innovation.

In the last reported quarter, North America revenues (61% of sales) increased 18.3% from the year-ago period to $37.30 billion. International revenues (28.8% of sales) increased 15.5% year over year to $18.04 billion.

Amazon has been introducing several new products for international markets that are expected to drive demand. It is also building fulfillment centers to cater to the increase in demand. The company has been expanding Prime on an international basis to strengthen its foothold in international markets and create a launch pad for other businesses. We expect the growing international market to continue driving its sales over the long term, as opportunities abound.

Although increased expenses may hurt the company’s bottom line in the near term, we believe that these measures are necessary to maintain its dominance in this highly competitive market.

Amazon.com, Inc. Price and Consensus

 

Amazon.com, Inc. Price and Consensus | Amazon.com, Inc. Quote

Zacks Rank & Stocks to Consider

Currently, Amazon carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Expedia Group, Inc. EXPE, Ctrip.com International, Ltd. CTRP and Rambus, Inc. RMBS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Expedia, Ctrip.com and Rambus is currently projected at 13.4%, 23% and 10%, respectively.

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