1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Funds: 286
Amazon.com, Inc. (NASDAQ:AMZN) is the best stock to buy and hold for 3 years. What started as an online book-selling venture in the 1990s is now a major e-commerce, streaming, and cloud technology giant. Over the past 5 years, the company has grown its top and bottom line by 18% and 34%, respectively. During the fiscal third quarter of 2024, it generated $158.9 billion in revenue, up 11% year-over-year. Amazon.com, Inc. (NASDAQ:AMZN) generates significant revenue, around 60% from its North American segment, which comprises mainly its e-commerce operations. However, its AWS segment takes the lead in terms of profitability. During the recent quarter, the AWS segment contributed $10.4 billion to the company’s total operating income of $17.4 billion.
Management has been making significant strides in its cloud services through strategic initiatives aimed at improving customer experience. It recently launched the Oracle Database@AWS service, which allows customers to migrate their Oracle workloads to AWS infrastructure with minimal changes to their databases or applications. In addition, Amazon.com, Inc. (NASDAQ:AMZN) also entered into a collaboration with Databricks, a leader in data analytics and AI. This partnership focuses on accelerating the development of custom AI models using Databricks Mosaic AI on AWS. Lastly, management signed agreements with several large enterprises, including Booking.com, Capital One, and Sony, signifying AWS’s growing influence and trust among major corporations.
Qualivian Investment Partners stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN): Amazon’s Q2 2024 results missed consensus revenue expectations slightly while beating EPS expectations nicely. Revenue grew 10.0%, including continued reacceleration in AWS (Amazon Web Services) which grew 19%; however, North American and International ecommerce revenue growth both showed slight deceleration in their growth rates from prior quarters. Advertising revenues grew 20%, which decelerated a bit from prior quarters as well.
Encouragingly, the company continued its streak of delivering impressive cost efficiencies in Q2 with operating margins jumping 420 bps vs. Q2 2023. Q3 2024 guidance was also a bit lower than consensus expectations sparking some short-term concerns about the strength of the consumer. We remain comfortable with our long-term outlook for Amazon’s ecommerce and AWS businesses, and expect they have new avenues of growth to exploit in scaling their advertising and generative AI business in the years ahead. However, we recognize that there is trepidation about the level of capex spending required to scale their generative AI business.”
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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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