Earlier quoted context omitted.
It is a well-established concept called https://www.investopedia.com/terms/s/sumofpartsvaluation.asp . A company's value is estimated on net present value (npv) of its projected, discounted future cash flows. If a company has a large, stable subsidiary that is growing slowly but is cash flow positive and a very fast growing but money losing subsidiary, it makes more sense to value parent company as if both subsidiari…
Yes I understand NPV and DCF but not OPs point. The eCommerce arm makes a lot of money so I don’t understand how you could come to the conclusion that its present value is zero.
I see what you're saying. The logic to the OP's point is "If AWS were to be spun out, on its own it should be worth 12x revenue, or $750B. If the Amazon web business were to be spun out on its own, it should be worth 6x revenue or $250B. Since those add up to $1T and the market cap of AMZN is $950B, the market assigns a -50B valuation to the rest of the company." I agree it's flawed logic. The market may just disagree with someone's sum-of-parts. It maybe conglomerate discount. It may be that the market is undervaluing AMZN, too. I don't think that many people would disagree AMZN's ecommerce division is valuable.