NEW YORK (
(AMZN - Get Report) is more than an online super-retailer. It's a company that has captivated the imagination and the hearts of millions, if not billions, around the world who think CEO Jeff Bezos could sell ice to the Eskimos and find a way to reach a space resort close to the moon.
Investors have bid shares of AMZN up to as high as $399, which equates to a price-to-earnings (PE) ratio of a stellar 143. What does AMZN have that Apple (AAPL) doesn't? For one, AMZN has almost as many ways to drive up revenue than Hershey (HSY) has kisses.
One of the cloud-based ways that Amazon is making more revenue is through its Web services division, or AWS. If you'd like to see a video that is both brief and entertaining just go to Amazon's Web page that explains the services that AWS performs.
It's no wonder that AWS is responsible for almost $2 billion in annual revenue, which is a tiny 3% of AMZN's $70.13 billion in annual, trailing 12-month (TTM) revenue. In the third quarter of 2013 (as of Sept. 30), the company saw year-over-year quarterly revenue improvement of 24%. As of the same date it was sitting on a stash of $7.7 billion with TTM operating cash flow of nearly $5 billion.
Whether you're a big company or an up-and-coming small one, using AWS will save lots of money in IT costs. The AWS page explains it well: "Cloud computing helps you reduce your overall IT costs in multiple ways. Our massive economies of scale and efficiency improvements allow us to continually lower prices, and our multiple pricing models allow you to optimize costs for both variable and stable workloads. Additionally, cloud computing drives down up-front and on-going IT labor costs and gives you access to a highly distributed, full-featured platform at a fraction of the cost of traditional infrastructure."
Even though Amazon has cloud computing competition from the likes of Google (GOOG), the "massive economies of scale" that Amazon has nearly perfected in this space means that even Google will have a tough time beating Amazon on pricing. GOOG launched its cloud-based equivalent to AWS recently, offering to rent to companies and individuals Google's network infrastructure. All I can say is, let the best company win this race that should benefit all of us one way or another.
Let me conclude with the analysts' forecast for Amazon's revenue in the quarter and year ahead. In the current quarter the average estimate among analysts is for AMZN to improve sales growth and revenue by about 22.4% to about $26 billion. With that increase the company should finish 2013 with annual revenue just south of $75 billion. In 2014 the same community of analysts is looking for annual revenue of around $91.5 billion, a 22% increase over 2013.
The biggest upside estimates from analysts have to do with AMZN's earnings per share. On average the analysts expect EPS in the current quarter to more than triple to 66 cents per share and for the entire year of 2013 Amazon will go from having lost 9 cents per share to a positive EPS of 73 cents. Some of that comes from AWS and most comes from the company's innovative ways of being the best at what it does.
While competitors have their heads in the clouds, Amazon knows how to lower pricing closer to terra firma.
At the time of publication the author had positions in AAPL and GOOG.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts