E-commerce behemoth Amazon.com Inc. (AMZN), which has already seen its share price rise by more than 40% in the last one year, could “double in the next three years,” according to mutual fund legend Bill Miller, formerly chair and CIO of Legg Mason, and currently chief investment officer at LMM, a Maryland-based investment firm. As of this writing, the company had a market capitalization of approximately $361 billion. Miller said Amazon would continue to rise on the back of revenue growth for its e-commerce division and increased margins in Amazon Web Services, its cloud business. (See also: Is Amazon Still A Bargain At All-Time Highs?)

The Seattle-based company reported revenues of $2.9 billion, an increase of 58% from previous year figures, for its cloud business in the latest earnings quarter. More importantly, operating margins for that business doubled to $718 million from $305 million a year ago. The company’s chief financial officer Brian Olsavsky attributed the margin expansion to “efficiencies gained on our infrastructure, better utilization, and better cost out.” The company is the leader in the cloud industry, which is expected to grow by 16.5 percent to $204 billion by the end of 2016. (See also: Steve Cohen's Point72 Buys Amazon In Q2). 

 

The Retail Case For Amazon 

Miller said that Amazon had greater upside as compared to Alphabet Inc. company Google (GOOG) or social media behemoth Facebook Inc. (FB) because the U.S, retail market is bigger than the digital advertising market. 

According to research firm eMarketer, total retail sales in North America last year amounted to $5.25 trillion and is expected to reach $5.8 trillion by 2018. Out of that figure, the US was responsible for $4.78 trillion. Retail ecommerce, where Amazon is the dominant player, accounted for 7.1% (or, $355 billion) of all sales. That share is expected to go up to $500 billion approximately by 2019. 

In contrast, the same firm has forecast digital ad spending of approximately $106 billion by 2020. That market is dominated Google and Facebook, which account for almost 75% of all digital ad spend. Still, given future forecasts, it is safe to assume that Amazon has a bigger market (and, consequently, more revenues) in the future.

 

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