5 Most Undervalued Retail Stocks to Buy According to Hedge Funds

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

Number of Hedge Fund Holders: 269
P/E Ratio as of January 23: 85.54x

Return since January 23: 33%

Amazon.com, Inc. (NASDAQ:AMZN) engages in the retail sale of consumer products and subscriptions in North America and other countries.

Amazon.com, Inc. (NASDAQ:AMZN) has released its financial results for Q3 2022. The company’s net sales saw 15% growth to $127.1 billion in Q3 2022 against $110.8 billion in Q3 2021. For Q4 2022, it anticipates its net sales of between $140.0 billion- $148.0 billion, or to grow in the range of 2%- 8% against Q4 2021. Its operating income is anticipated to be between $0 – $4.0 billion against $3.5 billion in Q4 2021.

UBS Group assumed the coverage of Amazon.com, Inc. (NASDAQ:AMZN) and it has reduced its target price on the shares of Amazon.com, Inc. (NASDAQ:AMZN) from $165.00 to $125.00 on January 4.

At the end of the September quarter, 269 hedge funds of the 920 funds in Insider Monkey database reported having stakes in Amazon.com, Inc. (NASDAQ:AMZN). The collective value of these stakes was $34.6 billion.

Here is what Polen Capital has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its fourth-quarter 2022 investor letter:

“If you look at a company like Amazon.com, Inc. (NASDAQ:AMZN) (the largest weighting in the Portfolio), we expect the company to generate accelerating earnings growth through the year as revenue growth accelerates from the challenging 2022 period and as the company makes more progress on its ongoing cost-cutting initiatives. Over a longer period, Amazon’s operating margins should continue to expand even further as a positive mix shift that has already been taking place, continues. The fastest growing parts of Amazon; Amazon Web Services (AWS), Fulfillment by Amazon, Advertising, and Prime subscription revenues, are much higher margin than the core e-commerce business

Amazon and PayPal were similar, in our view, in that both companies were “COVID beneficiaries” as their businesses accelerated in 2020 and 2021 and are now growing much slower on those tougher comparisons. Many, including us, were hopeful that growth would begin to reaccelerate in 4Q’22 (there were signs of this in 3Q’22), but both companies gave cautious guidance for the holiday quarter as consumer spending came under pressure. That said, we see both companies growing earnings above normal in 2023, even if a recession occurs. According to our research, both companies should see a return to more normal revenue growth as comparisons ease and both companies also undergo significant cost reduction plans, which should allow for strong incremental profit margins. Amazon, in particular, should see a very sharp rebound in margins.”

You can also take a peek at 11 Safe Consumer Stocks To Buy and 13 Best Consumer Staples Dividend Stocks To Buy