2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
Shares Shorted as of August 30: 71.38 million
Amazon.com, Inc. (NASDAQ:AMZN) features on our list of the most shorted stocks in the world, given that more than 71 million shares have been shorted as of August 30. California Attorney General Rob Bonta on September 14 announced that his office had filed a lawsuit in San Francisco Superior Court against Amazon.com, Inc. (NASDAQ:AMZN), alleging that the firm’s contracts with third-party sellers and wholesalers resulted in “artificially high” prices, reduced competition, and violated the state’s antitrust and unfair competition laws. The lawsuit requires Amazon to stop these practices, hire a compliance team, and pay a violation fine.
On September 12, DA Davidson analyst Tom Forte reiterated his Buy rating and a $151 price target on Amazon.com, Inc. (NASDAQ:AMZN) after the company announced the purchase of warehouse automation firm, Cloostermans. With this purchase, paired with the iRobot acquisition, Amazon.com, Inc. (NASDAQ:AMZN) is making a “concerted effort” into the robotics and automation market, the analyst told investors.
According to insider Monkey’s data, 252 hedge funds were long Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q2 2022, down from 271 funds in the last quarter. Jaime Sterne’s Skye Global Management is the biggest position holder in the company, with 15.4 million shares worth $1.6 billion.
Here is what RiverPark Funds specifically said about Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2022 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a company that has been “reinventing normal” since its formation in 1994. In his 2015 shareholder letter, Jeff Bezos wrote that a dreamy business has at least four characteristics: “customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time – with the potential to endure for decades.” Jeff’s advice was that “When you find one of these, don’t just swipe right, get married.” Unlike most mere mortal businesses that are lucky to have one such business, at the time, Amazon had three. Today, Amazon has five dreamy businesses under its one roof: AWS, Marketplace, Prime, Advertising and Logistics. Notably, each of these businesses were planted as tiny seeds and have grown mainly organically, quickly into meaningfully large businesses.7 And, given management’s belief that it is still “Day 1” of the internet, their focus on relentless innovation, and the tiny seeds they have recently planted, more dreamy businesses may soon follow.
In each of its current businesses, Amazon is the (or is one of the top two or three) dominant force in the world. For example, Amazon leads online retail with 41% market share, while the next ‘largest’ 11 companies each have single digit market share. AWS has 33% share in the cloud infrastructure market, exceeding the market share of its two largest competitors, Microsoft and Google, combined. 8 In Prime (launched in 2005), AMZN has well over 200 million subscribers,9 and with $31 billion of advertising revenue last year, AMZN is already the third largest advertising company (behind Google/YouTube and the Facebook family of apps). And finally, in its newest potential “dreamy” business logistics (encompassing both Fulfillment by Amazon and its recently launched “Buy with Amazon”), AMZN has the largest fulfillment and distribution capacity among U.S. retailers. Amazon has ~375 million square feet of total distribution capacity, dwarfing Walmart’s ~145 million square feet. Amazon is projected to surpass UPS in U.S. package volume in 2022, and in five years have a logistics network large enough that it won’t need to rely on UPS or the U.S. Postal Service.
In response to the pandemic, Amazon’s management team made the decision to interrupt its march towards higher margins and higher returns on capital to respond aggressively to its consumer’s demand explosion across its retail and its AWS infrastructure. This has resulted in lower operating margins within the income statement and much higher capital expenditures, reducing near-term free cash flow, but we believe, widening and deepening Amazon’s moats across all of its businesses. The fruits of these investments (increasing margins, expanding free cash flow and increasing ROIC) will ripen over the next few years, which will be one of the catalysts, we believe, that will drive the company’s stock materially higher…” (Click here to read the full text)
