Amazon stock (NASDAQ:AMZN) has long been a stock market favorite, but it has become more of a pariah in the last year after plummeting about 40% from its all-time high. What prompted such a dramatic shift? Recent headwinds include the following:
As a consequence of the epidemic, there’s been:
Scarcity of willing and accessible labor.
Problems with logistics, such as crowded ports and increased gasoline expenses.
Inflation, reducing company profitability and endangering consumer spending.
Two of the business’s three parts have had operational losses, and the corporation has spent billions of dollars to remedy these concerns.
If you believe that the obstacles are merely transitory and that Amazon has a bright future, the issue is whether Amazon stock (NASDAQ:AMZN) is now cheap. A “sum-of-the-parts” analysis provides hints.
Amazon Stock: What exactly is a sum-of-the-parts analysis?
We divide the firm into divisions or product lines and try to evaluate them independently using a sum-of-the-part analysis. If the aggregate of these elements exceeds the company’s real worth, this might signal a fantastic investment opportunity. This activity benefits a firm like Amazon, which works in various industries.
Amazon Stock: Amazon’s components are valued.
AWS is very lucrative and rapidly expanding, making it by far the most valuable component of Amazon. Revenue in that category increased by 35% in the first half of this year. Assuming that rate continues through 2022 before falling to 30% the following year, AWS will have $109 billion in yearly revenues in 2023.
Microsoft is an excellent comparison to AWS. Both provide software-as-a-service (SaaS), generate significant operational profits, and are intense rivals in the cloud industry. As of this writing, Microsoft has a forward price-to-sales (P/S) ratio of 8.0. Based on AWS’s 2023 projection, this multiple would value the sector at $872 billion. Because AWS is expanding faster than Microsoft, it may command a higher P/S value on the open market. With a forward P/S ratio of 10, the sector is worth $1.09 trillion.
Amazon Stock Analysis
Amazon currently has a total market worth of $1.17 trillion, so investors may buy the non-AWS portion of the firm for as little as $81 billion to $299 billion, depending on my estimations. Amazon Prime, digital advertising, physical storefronts, and the large online retail industry are among the non-AWS companies. From 2019 to 2021, these enterprises generated $408 billion in revenues and $21 billion in combined operating profits.
The non-AWS activity will be unprofitable in 2022, reflecting Amazon stock’s (NASDAQ:AMZN) present price. However, investors who believe AWS has a long runway and that the rest of the corporation will recover might consider purchasing shares during the market collapse. Amazon’s challenges will not endure forever, nor will this bear market. It’s doubtful that Amazon stock (NASDAQ:AMZN) will remain in the bargain bin after the rumors die down.
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Author Okoro Chinedu 
