Amazon.com, Inc. (NASDAQ:AMZN) has always been known for its core business on online transactions, but a closer look one cannot fail to note Amazon Web Services (AWS) that continues to gain traction on the cloud space. AWS has grown to become a key player on cloud infrastructure prompting many analysts to suggest it could be a possible spinoff stock in 2015. CNBC’s, John Jannarone, believes a spinoff could have a significant impact, in lifting Amazon valuation that has stagnated in the recent months heading into 2015.
Amazon Web services that offers computing capacity for customers is poised to have higher margins than Amazon.com, Inc. (NASDAQ:AMZN) core business as the race for the cloud continues to gain momentum. Amazon is 25% down for the year attributed to increasing concerns about the company’s razor thin profit margins.
“The assets should trade at different value; the stock would go up some would buy it. I think whether or not you think this is a good idea to me it is symptomatic of a bigger problem at Amazon,” said Mr. Jannarone.
The spinoff rumors come in the wake of a number of hedge fund managers being disgruntled by the way Amazon has been performing in the recent quarters. Concerns continue to mount on whether the company is focused on generating shareholder value or pursuing further growth opportunities whose chances of success remain unknown.
Despite Amazon not showing any signs of pursuing any spinoff, history of the likes of Hewlett-Packard Company (NYSE:HPQ) and eBay Inc. (NASDAQ:EBAY) clearly shows that anything could happen going forward. Spinoff plans according to Jannarone could in one way be accelerated by an activist investor getting involved in the stock and pushing for the same.
Dan Nathan, on the other hand, remains skeptical on whether a spinoff will be enough to solve the current woes that Amazon.com, Inc. (NASDAQ:AMZN) is facing.
“Why are AWS margins so low? Because they are undercutting everybody in the planet for market share. To me, I don’t think it makes sense I don’t think there is any trade here on that,” said Mr. Nathan.
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