Amazon's retail sales in the first quarter likely fell short of Wall Street's expectations, Piper Jaffray's Michael Olson said in a report Thursday.Olson based his forecast on proprietary research based on search terms.But Olson thinks other parts of Amazon's businessnotably Amazon Web Serviceswill surprise and make up for the retail shortfall.Amazon's newly-disclosed 100 million member Prime club has stoked investor exuberance about the company's ever-growing retail power.But the real star of Amazon's first quarter could be its various other businesses, from cloud computing to advertising.Amazon's retail sales likely fell short of Wall Street targets during the first quarter, reckons PiperJaffray analyst Michael Olson. Luckily, some of Amazon's other businesses appear to have picked up speed during the first three months of the year, Olson wrote in a note to investors on Thursday."We believe AWScould partially offset any softness in retail," Olson said, reiterating his overweight rating on Amazon's stock and his $1,650 price target. "We also believe there's a high likelihood of 'other' segment revenue upside from advertising.Olson's cautious view on Amazon's retail business during the first quarter comes from Piper Jaffray's search analysis. Piper has found that growth in the use in search terms such as "Amazon customer service," is highly correlated with the growth in the number of products sold through Amazon's site and, in turn, its revenue. Piper's "model suggests soft ... unit growth," Olson said in the note."Excluding fluctuations in foreign exchange prices, Amazon's core retail businesswhich includes its direct sales to customers and its commissions of sales by other merchants made through its websitelikely grew about 19% on an annual basis in the first quarter, Olson said in his note. Adding in subscription revenue and advertising sales, Amazon's retail business likely grew at about a 21% clip year-over-year in the period he said.Both estimates are shy of the 20% core retail growth and 22% expanded retail sales growth that the Street is expecting.AWS to the rescueBut he said there's good reason to believe other parts of Amazon's business will make up for any shortcomings in its retail segment. Most notably, he's bullish on AWS.AWS sales grew 45% on a year-over-year basis in the fourth quarter, which was up from the 43% growth rate the segment posted in the third quarter.The Street is expecting growth slowed back down to a 43% rate in the just-completed period. But Olson thinks the opposite may well be true, that AWS' growth rate actually increased in the period. A recent survey of chief information officers by Piper indicated that they are stepping up their adoption of cloud services, and 90%a record proportionplan to increase their spending with AWS, he noted."We, therefore, believe that as part of an accelerating cloud environment, AWS could see a surprise acceleration in Q1," he said.Piper has less insight into Amazon's advertising business. But Olson noted the rapid rate it's grown in recent quarters. Amazon's "other" segment, which includes advertising sales, grew by more than 50% on an annual basis every quarter last year, including a 60% rate in the fourth quarter."It wouldnt be surprising if strength in the company's 'other' revenue segment ... also helps to offset a less-exciting Q1 for retail," he said.SEE ALSO:Microsoft has all the right ingredients to top Amazon in the cloud, says the company's former Silicon Valley chiefJoin the conversation about this storyNOW WATCH: How does MoviePass make money
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