1. Amazon.com, Inc. (NASDAQ:AMZN)
10-Year Revenue Growth: ~21.7%
Number of Hedge Fund Holders: 339
Goldman Sachs reiterated a “Buy” rating on Amazon.com, Inc. (NASDAQ:AMZN)’s stock with a price objective of $255.00 amidst new tariffs introduced by President Trump. Despite the potential rise in costs for the company, Eric Sheridan, the firm’s analyst, lauded Amazon.com, Inc. (NASDAQ:AMZN)’s ability to mitigate such impacts through various strategies. The potential mitigating actions consist of negotiations with vendors to share the challenges related to the increased input costs, adjustment of prices on some items for customers, as well as shifting the mix of vendors and products sold on its platform to those witnessing reduced tariffs or to the US domestic alternatives.
Amazon.com, Inc. (NASDAQ:AMZN)’s investments in AI technology place it well to reap the benefits coming from the increased demand for AI-driven solutions. Such investments can result in improved product recommendations in e-commerce, more efficient logistics operations, and enhanced cloud services for the enterprise customers. Overall, the AI integration throughout Amazon.com, Inc. (NASDAQ:AMZN)’s ecosystem can help create a competitive advantage and fuel growth throughout multiple business segments.
Lakehouse Capital, a Sydney-based investment manager, released its February 2025 investor letter. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) posted a solid quarterly result with ongoing cost discipline driving significant operating leverage across the business. Net sales grew 10% year-over-year (11% in constant currency terms) to $187.8 billion whilst operating income grew 61% to $21.2 billion, well ahead of guidance and analysts’ expectations. Growth within the core e-commerce business remained healthy as the company delivered a record breaking Black Friday and Cyber Monday holiday shopping event. For the past two years now, management has been laser focused on driving efficiencies across the retail operations and these efforts are continuing to pay off. Notably, retail margins for their international segment have now been positive for four straight quarters and currently sit at 3.0%, which is pretty remarkable considering that just over two years ago they sat at -8.9%.
The company’s second largest segment, Amazon Web Services (AWS), also performed well with growth steady at 19% year-on-year. AI demand remains strong with management noting that AI related revenue is still growing triple digits. Big picture, AWS remains the leading cloud provider (in what is an increasingly two-horse race with Microsoft’s Azure) and with 85% of global IT spend still on-premises there is still plenty of runway for future growth. At current levels, Amazon’s valuation is attractive at 13x EBITDA, 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.”
While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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