2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ:AMZN) is an important part of the Vanguard Index 500 Fund (VFIAX). Wells Fargo & Company (NYSE:WFC) recently started covering Amazon.com, Inc. (NASDAQ:AMZN) with an Overweight rating and a $159 price target as the firm called the ecommerce giant its top pick. Wells Fargo & Company (NYSE:WFC) believes retail margins in North America could return to 2019 levels in 2025.
As of the end of the first quarter of 2023, 243 hedge funds tracked by Insider Monkey had stakes in Amazon.com, Inc. (NASDAQ:AMZN). The biggest stakeholder of Wells Fargo & Company (NYSE:WFC) during this period was Natixis Global Asset Management’s Harris Associates which owns a $2.4 billion stake in the company.
Lakehouse Global Growth Fund made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its April 2023 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) delivered a positive quarterly result with overall growth and profitability coming in ahead of expectations. Net sales increased 9% year-on-year (11% constant currency) to $127 billion and operating profits increased 30% year-on-year to $4.5 billion. In retail, growth proved resilient and it was encouraging to see operating margins for the North American unit turn positive for the first time since mid 2021 – coming in at 1.2% (or roughly 1.5% ex-restructuring). Even more encouraging, though, was Andy Jassy’s comments that they are confident they can achieve pre-pandemic operating margin levels of 4%-6% for North America with time. Looking forward, we continue to believe there is significant margin expansion ahead as cost pressures related to external macro factors, such as elevated shipping and fuel costs, and also lower productivity and efficiency continue to ease over 2023.
On the other hand, the outlook for the company’s second largest segment, Amazon Web Services (AWS), wasn’t so rosy. AWS grew 16% year-on-year to $21.4 billion, which isn’t terrible, but was a material deceleration from last quarters growth of 20%. Concerns were only heightened by management’s comments that growth slowed even further to 11% in April. As has been the case over the last few quarters, the headwinds were driven by enterprise customers seeking to optimise cloud spending and management reiterated that the slowdown is macro-driven. These comments are consistent with what we have heard from other cloud providers, and in our view, the current headwinds are more a factor of strong comparison periods and cyclical weakness, as opposed to any fundamental issues. Taking a step back, AWS remains the leading cloud provider (in what is an increasingly two-horse race with Microsoft’s Azure) and with 90% of global IT spend still on-premise there is still plenty of runway for future growth. At current levels, Amazon’s valuation at 5x gross profit is the most attractive it’s been since the GFC and we remain confident that patient shareholders will be treated well as the company is set to deliver many years of solid revenue growth and margin expansion.”
