Analysts react to Amazon Web Services (AWS) related unemployment and the announcement of ‘Global Accelerator’. Also if the U.S. and China do not reach a trade agreement, President Trump has hinted at the possibility of 10% tariff on iPhones and laptops.
Jefferies – AWS Conference Key Takes: “AWS Related Unemployment is Negative 100%”
AWS Cloud momentum was evident with 3+ days still left in the conference. Enterprise customers are making bigger commitments earlier with AWS, increasing partner deal sizes 3.5x. We forecast AWS revs to hit $71 billion by 2022, potentially worth ~$350 billion (at 5x sales) vs. current Amazon market capitalization ~$800Bn.
BAML: AWS rolls out Global Accelerator
AWS VP of Global Infrastructure, Peter DeSantis, presented at AWS re:Invent on Monday, and announced Global Accelerator, a network service that allows AWS customers to route traffic to multiple regions, improving application availability and performance for end users. Large AWS customers likely already run applications in multiple availability zones, and Global Accelerator aims to route traffic between these regions more efficiently (vs. relying on the unmanaged public Internet). Customers are charged for each accelerator that is deployed (a fixed hourly fee of $0.025) over the standard Data Transfer rates. The launch of Global Accelerator underscores the increasing capabilities of AWS’ global cloud network infrastructure and its ability to constantly offer new features to drive growth.
RBC Capital Markets – What Will Trump Tariffs Cost Apple?
In a WSJ interview, President Trump hinted at the possibility of 10% tariff on iPhones and laptops, should China and the US not reach an agreement on trade. We see 3 scenarios playing out from here: 1)Non-Event: This could be posturing ahead of G20 and no tariffs are implemented (notable that AAPL products have been exempt from current trade wars on both ends). 2) 10% tariff on the entire bill of material, AAPL could decide to absorb this and result in EPS impact of ~ $1.00 (~200bps to gross-margins), 3) 10% tariff impact to BOM built in China: This would mean processors and other components built outside of China (but assembled in China) are exempt. This could result in a ~ $0.45-55c annual EPS impact.