1. Amazon.com, Inc. (NASDAQ:AMZN)
Third Point’s Stake Value: $919,938,000
Number of Hedge Fund Holders: 302
Dan Loeb grew his position in Amazon.com, Inc. (NASDAQ:AMZN) by 22% and ended Q1 2024 with a stake of $919 million in the company. Loeb’s bullish on Amazon.com, Inc. (NASDAQ:AMZN) and sees it as another “best run legacy” company that stands to capitalize on AI’s secular trends. Other hedge funds also grew their positions sizably in the company as the stock was part of 302 investors’ portfolios in Q1 2024, up from 293 portfolios in Q4 2023.
Amazon.com, Inc. (NASDAQ:AMZN) was primarily known for its e-commerce business but over the years it has diversified into other verticals including cloud, streaming, advertising, and supply chain and logistics, among many others. The tech titan, like Loeb’s other top 5 picks, has clear economic moats when it comes to its space. Amazon’s been among the frontrunners to pen contracts with renewable power operators for 24-hour data centers. The company’s also making strategic investments in AI startups, further growing its exposure and footprint. It invested an additional $2.75 billion in AI startup Anthropic in March, swelling its total investment to $4 billion. Its AWS business currently holds a majority market share and is among the top 3 cloud providers rivaling Microsoft’s Azure and Alphabet’s Google Cloud. The company’s also developing its own custom AI chips (Trainium and Inferentia) for facilitating the development of deep learning models.
Apart from being a true disruptor in tech, Amazon.com, Inc. (NASDAQ:AMZN) has generated billions of dollars of free cash flow over the years. Over the past 10 years, its free cash flow has grown at a CAGR of 34%. In 2023, the e-commerce giant converted over 100% of its profits to free cash flow. Amazon ended the year with $30.42 billion in net income and $32.2 billion in free cash flow. Moreover, the company has grown its top-line by 22.4% over the past 10 years and even more impressively its profits (10-year CAGR for net income is 62.15%). For 2024, analysts anticipate the group to grow its EPS by 57% and revenue by 11%.
On the Street, price targets range from $180 to $353 (median is $220). AMZN has gained 45% over the past 12 months and its 1-year median target implies an additional 20% upside from current levels.
Amazon.com, Inc.’s (NASDAQ:AMZN) diversified business model, advances in AI and the data center market are painting an attractive story. While the stock is an obvious long-term portfolio pick, given its blue chip status and growth rates, its newest moves are adding more reasons to buy the stock while it trades at 3 times its sales while rivals MSFT and GOOG trade at higher P/S multiples of 13.3x and 7x. While we acknowledge the potential of AMZN as an AI play and believe that it should be in your portfolio, our conviction lies in the belief that some other AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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