Amazon.com, Inc. (NASDAQ:AMZN) does not have a problem if it spends massive amounts of money in projects that deplete its profit.
This is what Santosh Rao, head of research at Manhattan Venture Partners, says he believes in a discussion on CNBC. According to the analyst, Amazon.com, Inc. (NASDAQ:AMZN) can continue to spend on many projects just because they have a lot of revenue to fund those projects.
“No, I don’t think [Amazon is spreading themselves too thin]. I think what they are doing is just spending for the future and that has been their theme all along. They want to position themselves very well and they have the cash flow [to do so],” Rao says.
Furthermore, the revelation that Amazon.com, Inc. (NASDAQ:AMZN)’s cloud business, Amazon Web Services (AWS), is a profitable business, adds another reason why the company founded by Jeff Bezos is not in trouble, Rao says. He adds that because AWS will be a “good profit machine” for the company, this should fund a lot of their investments in other areas.
Rao says that the Internet commerce giant is really investing for the future and that he thinks they are not really doing anything erratic. What the company is doing is staying true to its “theme,” he says, and not making any wasted investments. This investments will be good for the company’s future, he tells CNBC.
When CNBC points out that Morningstar analysts point to cloud business as a $15 billion to $20 billion opportunity for Amazon.com, Inc. (NASDAQ:AMZN) by the end of three years, Rao adds that this estimate is in line with his own analysis.
He says that this year, the company is at a run rate of $6 billion with about $1 billion in profit for AWS. He tells CNBC that cloud and mobile are the big themes during the latest earnings call of the company.
Furthermore, Rao notes that projects like the Amazon button and the company’s other ventures may seem like moonshot projects at the moment but in a few years, these may pay off.
Ken Fisher’s Fisher Asset Management owned about 2.42 million Amazon.com, Inc. (NASDAQ:AMZN) shares by the end of last year.
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