10 Best Quality Stocks to Buy According to Analysts

7. Amazon.com Inc. (NASDAQ:AMZN)

Average Upside Potential: 20.91%

Number of Hedge Fund Holders: 308

Amazon.com Inc. (NASDAQ:AMZN) is engaged in e-commerce, cloud computing, online advertising, digital streaming, and artificial intelligence. It’s the world’s largest online marketplace, offering a vast selection of products across various categories. It also provides cloud computing services through AWS, streaming services like Prime Video and Music, and hardware products like Kindle and Echo.

AWS, its most profitable part, has over 30% profit margins and is expected to grow by 15% to 21% each year until 2028, so its success is important for the company’s future profits. AWS grew by 18.8% in Q2 2024. Amazon Prime has become very successful, with 200 million members worldwide. It helps customers spend more and is almost $100 billion per year.

The company is making money from ads on its content. The ad business is now worth $50 billion, after AWS. Evercore ISI thinks Amazon Prime Video could make between $1.8 and $3.3 billion in profit by 2025, which could increase its total profit by 3% to 5% this year.

Physical stores, like Whole Foods, are the smallest part of Amazon’s business and aren’t growing very fast. Amazon.com Inc. (NASDAQ:AMZN) has invested $30.5 billion in capital expenditures this year and expects more spending in the second half. This is driven by growing AI demand. Investors are confident in its future, especially AWS, which has a $156.6 billion backlog and improved profitability to over 30%. These factors add up to make it a great investment opportunity.

Meridian Hedged Equity Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:

“Amazon.com, Inc. (NASDAQ:AMZN) is a global technology company that operates e-commerce, cloud computing, digital advertising, and other businesses. We own Amazon because we believe it is well-positioned to benefit from several strong secular trends, including the shift to online shopping, the growth of cloud computing, and the increasing importance of digital advertising. The company exceeded expectations in the first quarter, with cloud-computing revenue growth accelerating, driven by easing cost optimization pressures and the ramp of generative AI workloads. The North American retail segment drove record operating margins, highlighting the success of Amazon’s efforts to improve efficiency and lower its cost to serve. International retail also showed promise, as emerging markets steadily progressed towards profitability. Given the strength across these key segments, we continue to hold the position in the company.”