Amazon Stock Remains the Cheapest of Its Cloud Peers

The cloud was the big technology and business story of the last decade. Amazon (NASDAQ:AMZN) led the revolution. So why is it lagging its peers in terms of performance?

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Over the last year Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is up 37%. Facebook (NASDAQ:FB) is up 56%. Microsoft (NASDAQ:MSFT) is up 60% and Apple (NASDAQ:AAPL) has more than doubled, up 108%.

But Amazon is up just 12% in the last 12 months. For 2019, it returned about 20%. That’s less than the average stock in the S&P 500, which was up 29%.

At its Jan. 14 opening price of $1,885 per share, Amazon has a market capitalization of $930 billion. If it hits consensus estimates for sales of $86 billion, it’s selling at 3.4 times annual revenue. Apple, with about the same sales volume, is worth almost $1.4 trillion.

By the standards of the current market, which I’ll admit is a little crazy, Amazon is dirt cheap.

Everyone Hates Amazon

Amazon is cheap because hating the company has almost become a parlor game.

When CEO Jeff Bezos donated $690,000 for relief from the Australian bush fires, he was roundly booed. That’s because he’s worth $117 billion.

Brands are leaving the platform in droves, although their products may still be available through Amazon-based resellers.

Amazon is spending lavishly on logistics. It offers same-day delivery on an increasing number of products, in an increasing number of places. The result is media coverage claiming it’s “killing” FedEx (NYSE:FDX).

When Bezos goes to India he will be met by protesters, because Amazon offers low prices. Even in its home city of Seattle, Amazon is being hit with restrictions on its political contributions.

A new anti-Amazon documentary on PBS says the company is run with “military-like precision” and is too powerful.

Wherever it turns, Amazon today faces opposition. Retailers are figuring out how to compete with it. Microsoft is said to be beating it in the cloud. A host of competitors have appeared in streaming.

But is anyone else really winning?

Amazon Is Everywhere

Microsoft may be “catching up” in cloud, but Amazon still has a 40% market share, double what Microsoft has. Retailers are getting better at e-commerce, but Amazon still has 38% of that market and everyone else is in single digits.

Disney (NYSE:DIS) is leading a pack of competitors, including Apple, AT&T (NYSE:T), Comcast (NASDAQ:CMCSA) and ViacomCBS (NASDAQ:VIAC) into streaming. They claim to have several million subscribers each. Amazon Prime has over 100 million members, just in the United States, and my favorite Prime show comes from India. Also, those new streaming services are mostly being sold through Amazon’s Fire TV.

Then there’s Amazon Alexa, which has a 70% share of the smart speaker market, against 25% for Google Home. Voice is becoming the new interface of choice, and Amazon is killing the competition.

Despite all this dominance, and the fact that there are competitors everywhere in the Amazon universe, Amazon is still just the fourth most-valuable company in the world. Apple is at $1.4 trillion, Microsoft at $1.3 trillion, and even Alphabet has passed Amazon, at $991 billion.

The Bottom Line on AMZN Stock

Amazon shares peaked last summer at $2,020, $150 higher than where they’re presently trading.

There’s an old saying from the last century that if a technology company is handing out dividends, it doesn’t have anything better to do with your money.

Amazon isn’t handing out dividends. It’s continuing to reinvest in warehouses, in trucks, in data centers, in entertainment and in software. Unlike its cloud peers, Amazon is literally everywhere.

Yet it’s only worth a fraction of what those peers are worth.

Dana Blankenhorn is a financial and technology journalist. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL, MSFT and AMZN.