Brent Bracelin of Pacific Crest says Amazon.com, Inc. (NASDAQ: AMZN) AWS growth could moderate this year and next as heavy investments from Microsoft Corporation (NASDAQ: MSFT) Azure and Alphabet Inc (NASDAQ: GOOGL)'s Google Cloud could increase the viability of these alternatives.
Bracelin noted industry checks suggest heavy investments by Microsoft and Google have created viable global alternatives to AWS, which gives enterprises more cloud options.
That said, despite increasing viability of Microsoft and Google, the analyst pointed out AWS should maintain a multiyear competitive lead. But, the growth could moderate.
“We are lowering our AWS estimates slightly assuming revenue growth falls below 40% y/y for the first time in 2017 and could dip below 30% by the end of 2018,” Bracelin wrote in a note.
The analyst also cut AWS valuation by $10 to $375 from $385, which reduces Amazon’s target price to $895 from $905. However, Bracelin maintained Overweight rating on Amazon and expects that 3P growth will continue to exceed 1P.
At last check, shares of Amazon were down 0.20 percent to $851.74.
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