1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Funds Investors: 286
Stephanie Link, Hightower Advisors CIO, explained in a latest program on CNBC her bullish view on Amazon.com Inc (NASDAQ:AMZN) and why she’s buying the stock:
“I trimmed Amazon in early February. The stock is down 19% since then. It’s now trading at a pretty interesting valuation in my mind—13 times EBITDA versus a historical average of 17.5 times. When I sold Amazon, it was at 17 times EBITDA, so it was rich relative to its history. The story on retail is getting bigger—Amazon, Walmart, Costco—they had 46% market share. Amazon has 28% market share and actually grew their market share by 410 basis points in the past quarter, so they’re humming there. Profitability at AWS is absolutely on the rise, and I think they’re still capacity constrained. So I expect the second half of the year to see an acceleration in AWS.”
Despite weak guidance, Amazon could easily surpass $100 billion in operating income within the next two years because of its AWS growth engine. In the latest quarter, Amazon Web Services sales jumped 19% and operating profit for the segment jumped 62% in 2024 on an annual basis.
The market is currently forecasting $6.27 per share in profits this year (a 13% YoY growth) and $7.59 per share next year (a 21% YoY growth). Amazon’s stock is priced at a profit multiple of 30.2x. This valuation may look rich, but when we incorporate AWS growth, the stock has more upside potential.
Parnassus Core Equity Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) posted better-than-expected quarterly earnings, lifting investor confidence in the e-commerce giant’s ability to generate margin while continuing to invest into its large AI and retail end markets.
Amazon’s shares experienced volatility throughout the year as IT spending and the company’s margin structure came under scrutiny. Despite this, the stock outperformed as sentiment and results improved across both the overall environment for Amazon Web Services and the company’s ability to show margin.”
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. 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 this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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