5 Best Information Technology Services Stocks to Buy

1. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 240

Though not a pure play IT services company, the sheer size and penetration of Amazon.com, Inc. (NASDAQ:AMZN)’s Cloud platform, AWS, and the services Amazon provides to companies in deployment and maintenance of AWS makes it a noteworthy name in the industry. During the first quarter of 2023 Amazon.com, Inc. (NASDAQ:AMZN)’s AWS revenue came in at $21.35 billion. AWS provides services related to AI, machine learning, storage, server-less computing and more.

Amazon.com, Inc. (NASDAQ:AMZN) is one of the favorite stocks of hedge funds. Insider Monkey’s database shows that 240 hedge funds had stakes in the company as of the end of the fourth quarter of 2022.

Polen Global Growth Strategy made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2023 investor letter:

“We raised our position in Amazon.com, Inc. (NASDAQ:AMZN). During 2022, Amazon’s business experienced revenue deceleration from pre-pandemic levels combined with higher expenses resulting from inflation pressures as well as costs in their fulfillment segment. The fulfillment costs were set in motion during the pandemic when demand overwhelmed their network. More recently, AWS – along with Azure and GCP – experienced a deceleration in growth as customers globally feel pressure to optimize their usage in this tough macroeconomic environment. We don’t expect this deceleration to persist for the long-term given the secular trend of companies transitioning to the cloud.

For long-term investors, we believe this combination provides an opportunity and that Amazon is now poised to re-accelerate revenue growth, of which we are already seeing signs, while expanding margins and free cash flow. With respect to margins, given the fast growth in AWS and advertising, the latter generating almost $40 Billion in sales and growing at greater than 30% recently, the resulting mix-shift could result in operating margins of 10% or higher over time. This level would represent a 5x increase over 2022 levels. In sum, we are capitalizing on what we believe is arguably one of the most competitively advantaged business in the world, which is growing well, poised to accelerate that growth and expand margins, and is trading at an attractive price.”

You can also take a peek at 10 Most Profitable Small Businesses in 2023 and 10 Best April Dividend Stocks To Buy.