1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Funds Investors: 286
Mark Mahaney, Evercore ISI head of internet research, said in a latest program on CNBC that he believes the fundamentals of top tech stocks are intact and most of the latest selloff was “self-inflicted.” According to CNBC, Amazon.com, Inc. (NASDAQ:AMZN) is one of the top picks of Mahaney.
“It seems like most of this stuff, from where I stand, seems self-inflicted. I looked at the fundamentals of most of the large-cap internet names — all the high-quality names — and their fundamentals were very consistently strong or robust. As recently as maybe the end of January or the beginning of February, when they gave their earnings and talked about the March quarter outlook, things seemed very consistent. We’ve just had a lot of policy volatility, as far as I can tell, that’s really impacted these stocks. The backdrop here, of course, Scott, is that we had a two-and-a-half-year bull market in some of these tech stocks, especially the highest-quality names. The large-cap internet stocks I look at were up 100% from the middle of 2022, when interest rates stopped rising, to the end of last year. So, there was a setup here for — if you had a negative catalyst come through — there was a setup for a correction.”
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 might look rich, but when we incorporate AWS growth, the stock seems to have 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 under the radar 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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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