5 Undervalued Wide Moat Stocks to Invest in

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

Number of Hedge Fund Holders: 269

Amazon.com, Inc. (NASDAQ:AMZN) is an e-commerce and cloud computing leader with considerable scale that gives it substantial competitive advantages. While its shares trade for a forward P/E of 50.76, Amazon.com, Inc. (NASDAQ:AMZN) is nevertheless arguably cheap given its earnings growth potential in cloud computing.

Baron Funds commented on Amazon.com, Inc. (NASDAQ:AMZN) in a Q3 2022 investor letter,

Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest e-commerce retailer and cloud services provider. Shares of Amazon increased 6% in the quarter after the company reported strong results with 7% year-over-year revenue growth driven by 33% growth in Amazon Web Services (AWS), Amazon’s leading cloud computing service, while guiding for an acceleration in third quarter revenue growth, which is expected to be between 13% and 17% year-overyear. Amazon’s share of e-commerce is roughly 40%, far ahead of competition, yet domestic e-commerce accounted for only 14.5% of total retail sales (according to U.S. Census Bureau data for the second quarter of 2022), implying durable growth opportunities ahead. Internationally, the opportunity remains large as Amazon still has less than a 2% market share of international retail spending. Its advertising share is also only 3% and growing, underpinned by the structural closed-loop systems it enables (merchants know exactly whether their ad dollars resulted in a purchase since they are all done on the Amazon platform), which enables accurate targeting and measurement. Lastly, AWS has a good runway for growth as the industry still represents only 9.5% out of the $4.3 trillion of global IT spending according to Gartner. Areas such as logistics and health care present additional optionality.