From one FAANG to another: Jeff Bezos' Amazon creates this big opportunity for Indian FAANG stocks - Here's how

The world knows FAANG stocks as a combination of companies providing tech services. Some of the renowned FAANG stocks are Apple Inc, Amazon, Google, Netflix and Facebook. But, India also has its own list of FAANG stocks including IT-majors like Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies and Tech Mahindra. But did you know, a strong business module in one global FAANG stocks can actually create a bundle of opportunities for Indian IT companies too? Guess what! This is exactly what Jeff Bezos led Amazon has created, and in fact growth in this online service provider bodes well for the Indian tech majors. 

Sandip Agarwal and Pranav Kshatriya, analysts at Edelweiss Securities believe it would be Amazon’s  Web Services (AWS) which will bring the best for Indian techs. 

Continuing its market leadership in the cloud segment, Amazon’s AWS registered yet another strong showing in Q1FY19 with revenue up by 42% on a quarterly basis. Performance of AWS accounted for 13% of Amazon’s overall sales. Also, the capex guidance of Amazon for the entire current fiscal, as per the duo indicates continued investments in AWS, consolidating its leadership over the fledgling cloud servers market, which is growing about 40% each year.

A little more about AWS: According to Edelweiss analysts, AWS, which forms 13% of Amazon’s (AMZN) revenue, is bringing the best enterprises of the world on its cloud platform. The impact of AWS is across sectors and geographies; as reflected in its wide spectrum of partnerships in Q1FY19 alone: Lyft (cab hailing services), Volkswagen (automotive), Standard Bank Group (BFSI).

AWS has consistently grown over 40% YoY every year, and we don’t expect this pace to slow anytime soon.

Following which, they said, “We believe AMZN’s aggressive capex guidance and upbeat outlook bodes well for the Indian IT sector.”

Adding, the duo says, “We posited in our report that the self-fueling ‘data smelter’ is genetically modifying IT spends as deals in SMAC are by and large transformational and not focused on saving or cutting costs. Moreover, such spends are being decoupled from macroeconomic idiosyncrasies. Therefore, we argue that demand for digital services will sustain as IT spends become more integral and indispensable to business survival.”

During Q4FY19, Indian IT firms saw jump by 28% to 44% in digital revenues. Going forward, the analysts added, “we expect growth rates of more than 30% to sustain owing to favourable demand levers, the cloud being one.”

Which Indian FAANG stock you should buy?

As per the duo, digital technologies such as cloud and data analytics are fairly higher up companies’ adoption curves, and we expect the growth rates in Digital to sustain at current levels. Deal sizes will get bigger and more complex further up this curve.

Besides, as more technologies in the SMAC family move from pilot phases to enterprise-wide adoption, the duo says, “large-cap stocks stand to disproportionately gain owing to their better investments in digital. Maintain ‘BUY’ on Infosys, HCLT and TechM. Maintain ‘HOLD’ on TCS and Wipro.”

Hence, why not feel the magic of Amazon in your very own stock portfolio with Indian FAANG stocks? Surely, this is a no-brainer.