1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) has often been perceived as a technology investment play, given its investment in various tech solutions to strengthen its edge in multiple sectors. Nevertheless, it stands out as one of the most promising growth stocks according to hedge funds for diversifying an investment portfolio in the consumer cyclical sector.
With the recent interest rate cuts expected to bolster consumer purchasing power, Amazon should be one of the biggest beneficiaries as customers flocking its e-commerce platform.
Amazon.com, Inc. (NASDAQ:AMZN)’s long-term prospects lie in the digital marketplace as the Prime program gains widespread recognition. The more benefits Amazon offers through Prime, the more loyal its customers become, allowing it to increase its pricing and thus generate more revenue.
Likewise, the company emerged successful in the online shopping sector by integrating the retail business framework and leveraging its vast scale to provide outstanding service and competitive pricing. This strategy is being replicated in the cloud industry, where it commands a 31% market share.
While the company generates most of its revenue from the online marketplace, it reaps most profits from its cloud unit, which is billed as the world’s largest cloud infrastructure. AWS operates at much higher margins, thus subsidizing the growth of Amazon’s lower-margin e-commerce business.
Amazon.com, Inc. (NASDAQ:AMZN) has also sought to diversify its revenue stream by advertising live sports and acquiring the rights to air National Basketball Association and Women’s National Basketball Association games beginning in 2025.
Analysts expect Amazon’s earnings to grow by nearly 28% yearly over the next three to five years, justifying the stock trading at a premium with a price-to-earnings multiple of 30. Additionally, analysts rate the stock as a buy with an average price target of $223.43, implying a 21.77% upside potential. Based on our Insider Monkey database, by the end of Q2 2024, 308 hedge funds had invested in AMZN, with their total stakes reaching $65.85 billion.
Diamond Hill Select Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
While AMZN is an exceptional investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than the ones mentioned in our list but that trades at less than 5 times its earnings check out our report about the cheapest AI stock.
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