1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 302
Morgan Stanley recently published a list of stocks that are poised to be “winners” by providing convenience to consumers in the current environment where spending is slowing. Morgan Stanley’s Michael J. Wilson believes allowing consumers to “save time and make their life easier is a valuable product.” Amazon.com Inc (NASDAQ:AMZN) is part of Morgan Stanley’s list.
Amazon.com Inc (NASDAQ:AMZN) is also on investors’ radar as the company is holding Re:Inforce conference where it would cover key topics like generative AI, risks, compliance, data production, and much more.
Amazon.com Inc (NASDAQ:AMZN) is becoming an AI power house thanks to its AWS business, which saw operating margins cross 37% during the first quarter. AWS operating margins have now came in more than 30% for the past five straight quarters. Amazon.com Inc’s (NASDAQ:AMZN) revenue in the first quarter jumped 12.5% YoY and its adjusted EPS more than tripled. Revenue in North America and International segments grew as well. Analysts believe digital ads is another strong revenue stream for Amazon.com Inc (NASDAQ:AMZN), with revenue from the segment increasing 24% YoY to $11.8 billion in the first quarter.
Baron Fifth Avenue Growth Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its first quarter 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest retailer and cloud services provider. Shares increased 18.7% on quarterly results that exceeded consensus expectations, with revenue growth of 13% year-over-year and operating margins of 7.8% (up from 1.8% a year ago). We believe that Amazon is well positioned in the short to medium term to continue improving its core North American margins, which have reached 6.1% in the fourth quarter, the seventh straight quarter of margin improvement and an overall improvement of 800bps. Amazon has been rearchitecting its fulfillment network, improving efficiency, reducing cost-to-serve and accelerating delivery speeds thanks to initiatives such as regionalization, with the number of items delivered during the same day or overnight increasing by nearly 70% year-over-year. Reducing the cost to serve also enables Amazon to sell lower priced items and expand its addressable market to everyday purchases. Additionally, Amazon continues to benefit from its fast-growing, margin-accretive advertising business winning market share in digital advertising thanks to its structural advantages of a closed loop system, which enables a deterministic calculation of Return on Ad Spending. We also believe that e-commerce still has long duration growth ahead as it still accounts for less than 15% of retail. Similarly, Amazon’s cloud service, AWS, remains relatively early in its S-curve with cloud representing around 13% of worldwide IT spending13 incremental tailwinds across the three layers of the GenAI stack – infrastructure with NVIDIA’s own AI chips (Trainium and Inferentia) as well as with its offering of NVIDIA chips, platform (Bedrock), and applications (first and third party).”
However, Amazon.com Inc (NASDAQ:AMZN) skeptics believe the stock has run too much as its valuation is high. For value-conscious investors the market is indeed teeming with other opportunities. If you are looking for an AI stock that is as promising as AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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