Amazon: A Rather Sensible Proposition

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One does occasionally stumble upon a company that isn’t entirely dreadful. Amazon, you see, isn’t merely a purveyor of…everything. It’s a rather fascinating beast, and frankly, a surprisingly sound investment. The retail side? Perfectly adequate, I suppose, but it’s the cloud operation that’s truly doing the heavy lifting – and, more importantly, providing the profits.

Some fret about the market capitalization – a rather vulgar discussion, really. But one shouldn’t concern oneself with numbers so large they become meaningless. What is important is the direction of travel, and Amazon Web Services – AWS, as the moderns insist on calling it – is positively sprinting. And now, with this artificial intelligence business…well, that’s simply added a touch of panache, hasn’t it?

If AWS maintains its current trajectory – and I see no reason why it shouldn’t – we might just be looking at a rather rewarding outcome. Let’s examine the details, shall we?

Cloud Nine, and Rising

AWS, you see, dominates the cloud services arena. A rather useful position to be in. They generated a perfectly respectable $11.4 billion in operating profit last quarter – a staggering 65% of the entire company’s earnings. Quite impressive, even for a cynic such as myself. And the growth is accelerating. A 20% year-over-year increase, despite the fact they’re struggling to acquire sufficient computing capacity. One might call it a charming little crisis, wouldn’t you agree?

Of course, there’s competition. Microsoft Azure and Google Cloud are attempting to muscle in. They’re growing at a slightly faster clip, but frankly, they’re a bit late to the party. Amazon is expanding its data center capacity, and one anticipates a swift response. A rising tide, as they say, lifts all boats, but some boats are, undeniably, more seaworthy than others.

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Cash is Always King, Darling

Amazon is a substantial operation – $691 billion in revenue, if one is keeping score. But it’s not the size that matters, it’s what they do with it. They’ve converted that revenue into a truly remarkable stream of operating cash flow – $130 billion in the last year. A considerable sum, even by modern standards. And they’re deploying it wisely, expanding their data center footprint. A sensible move, wouldn’t you say?

All this artificial intelligence nonsense requires an enormous amount of computing power – servers, electricity, the whole tiresome business. Amazon, with its robust cash flow and high margins, is perfectly positioned to capitalize on this trend. A rather clever arrangement, wouldn’t you agree?

A Valuation That Doesn’t Quite Offend

The momentum of AWS, combined with this burgeoning cash flow, makes the stock’s valuation…acceptable. One can gauge the value by comparing the stock price to cash flow per share. Over the past decade, Amazon’s price-to-cash flow multiple has fluctuated wildly. Currently, it’s at 19.2 – a rather modest figure, considering the circumstances. It’s well below the 20-year average of 27.

Wall Street expects free cash flow to soar from $21 billion this year to a staggering $141 billion by 2029. A rather optimistic forecast, perhaps, but one can’t entirely dismiss it. They’re cutting costs, improving margins, and, of course, benefiting from the inexorable migration of data to the cloud. A predictable trend, really, but one that still offers considerable opportunity.

All things considered, Amazon’s current valuation leaves room for a rather attractive long-term return. Not a spectacular proposition, perhaps, but a perfectly sensible one. And in these trying times, one should always appreciate a bit of sense.

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2026-01-23 14:12