1) Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holdings: 308
Amazon.com, Inc. (NASDAQ:AMZN) is engaged in the retail sale of consumer products, advertising, and subscription services. It also has a cloud services business, AWS.
Wall Street analysts believe that Amazon Web Services (AWS) was a beneficiary of the transition of IT spending to the cloud from on-premises. The advent of generative AI ramped up this shift as organizations accelerated to build AI models in the cloud. The unfolding of AI megatrend should support AWS but, at the same time, Amazon.com, Inc. (NASDAQ:AMZN) needs to invest heavily in the technology.
Amazon.com, Inc. (NASDAQ:AMZN)’s substantial investments in logistics and fulfillment impacted margins for some time, but market experts believe that the company has now been reaping the benefits of earlier expenditures. A critical area of focus for Amazon.com, Inc. (NASDAQ:AMZN) revolves around reducing the “cost to serve.”
Notably, a resilient consumer, sustained growth in advertising revenue, and healthy momentum at Amazon Web Services should continue to aid Amazon.com, Inc. (NASDAQ:AMZN). The company continues to gain market share in global e-commerce and also improve its value proposition to merchants and consumers. The rate-cut cycle and changing dynamics of consumer sentiment should help Amazon.com, Inc. (NASDAQ:AMZN) in the near term.
Scotiabank covered the shares of Amazon.com, Inc. (NASDAQ:AMZN) on 11th October. They gave a “Sector outperform” rating and a $245.00 price target. Meridian Funds, managed by ArrowMark Partners, released its second quarter 2024 investor letter. Here is what the fund said:
“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.”
While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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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