Despite Amazon’s moat in e-commerce, the segment has continued to be a drag on the company’s fundamental and valuation performance in recent years following the pandemic-era boom. The unit’s substantial exposure to deteriorating financial conditions and slowing growth have only emphasized multiple compression risks for the stock by highlighting the weight of retail’s low-valuation nature due to the industry’s lack of lucrative profits. Meanwhile, deceleration in Amazon’s profit engine – AWS – has only further dampened sentiment on the stock in recent quarters.
Despite being primarily known for its e-commerce and cloud-computing moats, Amazon’s operations span across as many as six key segments, including also brick-and-mortar retail, digital advertising, and other subscription services. For much of the past several years, AWS has emerged as a key contributor to the company’s sprawling cash flows, mitigating losses stemming from some of its speculative bets to even its sprawling e-commerce unit in the aftermath of overexpansion during the pandemic-era boom. Yet, the robust AWS cash flows have largely been overshadowed by modest valuation multiples attributable to other areas of the company’s mixed operations – including low-multiple segments like retail and e-commerce.
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Great article