For Complex Companies, Break It Down into Parts to Find Potential Bargains Now

Many companies offer just one product or service. Some of today’s large companies, however, offer many services and products (or even both). That’s especially true in the tech space, where rapid changes result in continued ongoing sales and support.

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  • Some of these companies have a number of businesses that could be broken out into separate parts. And right now, this “sum of the parts” analysis is starting to show that it may be time to start dipping a toe into some tech giants.

    One clear example is Amazon (AMZN). The company is down 26 percent over the past year, and more than one-third off its 52-week high. That’s sent the company’s market cap down to just under $1.3 trillion right now.

    With the company’s web services division, AWS, valued already at $1 trillion and growing, that values the rest of the business at $300 billion. That’s a bit low for one of the world’s top e-commerce sites, Whole Foods, and the library of content on its streaming platform.

    Action to take: Shares are hardly cheap, but they’re at a valuation not seen since the beginning of the pandemic. And with the company not being a pandemic play, shares are likely to recover in time. While the company is some years away from paying a dividend, it may be a prudent time to add some shares to your stock cart now.

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  • For traders, the August $3,000 calls, last going for about $48.50, could leverage a move higher in the coming months for some fast, mid-double-digit profits or better.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.