3. Amazon.com Inc. (NASDAQ:AMZN)
Analysts’ Upside: 35.55%
Number of Hedge Fund Holders: 339
Amazon.com, Inc. (NASDAQ:AMZN) is a major American multinational technology company that engages in a variety of industries, including e-commerce, cloud computing through Amazon Web Services (AWS), online advertising, digital streaming, and artificial intelligence. The company has been a pioneer in harnessing data analytics and recommendations for e-commerce, using technologies like DynamoDB, Redshift, and EMR.
On February 24, Truist Securities’ analyst Youssef Squali reiterated a Buy rating and a $265 price target for Amazon.com, Inc. (NASDAQ:AMZN). Squali’s research is based on data through February 17, revealing that North American revenue is marginally outperforming consensus forecasts for the quarter to date. According to Squali, this gives Amazon an advantage over its smaller competitors while keeping its reputation as a major player in the Broadline Retail business.
Amazon.com, Inc.’s (NASDAQ:AMZN) financial performance in the fourth quarter of 2024 showed notable growth, with the company beating expectations by raking in an EPS of $1.86 and revenues of $187.8 billion. Operating income also increased to $21.2 billion in Q4 2024 from $13.2 billion the previous year, while net income more than doubled to $20 billion, thanks mostly to AWS.
Polen Focus Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
“Consistent with our thesis, Amazon.com, Inc. (NASDAQ:AMZN) has continued to see operating margins expand, hitting 11% in the most recent quarter after bottoming around 2% at the end of 2022. This march higher in margins stems from a mix shift towards faster-growing, higher-margin segments like Amazon Web Services (AWS) and Advertising, combined with better fulfillment efficiency in the e commerce business following significant investments in recent years. Further, speaking to its runway ahead, CEO Andy Jassy noted the company’s AI business is a “multi-billion-dollar business growing triple digits,” 3x faster than AWS did itself at the same stage in its evolution. While we trimmed our position during the quarter, Amazon remains our largest position, as we expect approximately 20% earnings growth over the next five years driven by a mix of solid organic revenue growth and continued margin expansion.
We trimmed our positions in UnitedHealth Group, Amazon, ServiceNow, and Gartner during the quarter. Amazon continues to deliver excellent results with all businesses growing robustly and profit margins expanding. When we significantly increased Amazon’s weighting in the portfolio about two years ago, its operating margins were at 2%, and we anticipated they would expand to the mid-teens over the next few years. Today, they stand at 11%, and we expect them to expand closer to the high-teen level in the next few years. The earnings growth potential from here is roughly 20% per annum based on our expectation for revenue and profit margin expansion. While this still represents excellent potential and Amazon remains our largest position, we no longer feel it merits a maximum position size.”
