1. Amazon.com, Inc. (NASDAQ:AMZN)
5-Year Net Income Growth: 29.71%
5-Year Revenue Growth: 19.11%
TTM Net Income: $44.42 Billion
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is an international technology company known for its online retail services. Its retail services include online shopping platforms and physical stores. The company also engages in cloud computing services through its Amazon Web Services (AWS), which is one of the major parts of its business.
The company has taken strategic measures to adopt artificial intelligence across its business offerings. Amazon.com, Inc. (NASDAQ:AMZN) had to face some challenges due to an all-time high inflation rate, however, the recent interest rate cuts and changing consumer sentiment have helped the company a lot. During the second quarter of 2024, it improved its net sales by 10% year-over-year to reach $148 billion and as a result, its earnings per share nearly doubled to $1.26.
The company’s cloud business has also done well due to the recent AI integration and jumped 19% year-over-year. The strategic edge of the company comes from its market share which stands at around 38% of the online retail sales in the United States and with the easing cycle from the Fed the share and sales are only expected to grow further.
Amazon.com, Inc. (NASDAQ:AMZN) is the best high-growth NASDAQ stock that is profitable in 2024, we say this because not only has the company generated $44.4 billion in net income during the past 12 months but has also grown its free cash flow by 572% year-over-year.
Alphyn Capital Management stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:
“Amazon.com, Inc.’s (NASDAQ:AMZN) continued growth is driven by its strong performance in AWS and advertising, which grew 19% and 20%, respectively. E-commerce growth moderated to 9.3%, likely due to softer consumer demand.
In previous letters, I mentioned how Amazon’s heavy investments in logistics and fulfillment suppressed margins for some time, but the company is now reaping the rewards of those earlier expenditures. European operations have been profitable for the second consecutive quarter, while North American operating margins have risen from pandemic lows to 5.3%. A key ongoing area of focus for Amazon has been reducing the “cost to serve”; this is beginning to show tangible benefits. In 2023, Amazon undertook a “regionalization” strategy, which divided the U.S. into eight distinct regions for fulfillment and transportation, with corresponding distribution centers in each. As I learned from an expert interview done by InPractise, “regionalization” has resulted in estimated shipping expenses dropping from $4.76 per unit to $4.50, and they are now approximately $4.26, with potential reductions of 2-3% annually. Interestingly, Amazon leaned on its third-party vendors (3P) to finance much of this strategy. It did so by requiring 3P vendors ship inventory to the multiple regional distribution centers, instead of to a single location as they used to do. Moreover, Amazon imposed penalties for failing to meet strict minimum and maximum quantities. In this way, Amazon used 3P inventory to expand its distribution capacity by around 24 million square feet, much of which it could use for its own 1P inventory. Clever strategy, but one wonders if this raises the risk of an eventual vendor backlash due to the added financial and logistical pressures on 3P sellers.
Like Alphabet, Amazon is investing heavily in its AWS infrastructure to support its growing AI business. In the first half of the year, the company spent $30.5 billion on capital expenditures, with plans to exceed that in the year’s second half. When questioned about this during the earnings call, CEO Andy Jassy emphasized that they are seeing significant demand for AI-related services, which he believes will become a “very large” business for Amazon.”
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 timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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