10. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders In Q2 2024: 308
Share Price Target Upside: 13%
Share Price Target: $210
Amazon.com, Inc. (NASDAQ:AMZN) is an eCommerce and cloud computing company. This enables it to benefit from the sizeable nature of the eCommerce industry and the high growth, high margin, and recurring revenue offered through cloud computing. Amazon.com, Inc. (NASDAQ:AMZN) dominates the eCommerce market through its market share which saw it attract 3.25 billion users to its website in June. This also provides a wide moat to the firm in the advertising business, as merchants are eager to sell and advertise their products on its platform. Amazon.com, Inc. (NASDAQ:AMZN) also enjoys key operating advantages, as evidenced by the click to door speed of just 1.9 days for the firm as opposed to 4.4 days for the industry. Amazon.com, Inc. (NASDAQ:AMZN)’s resources have also enabled it to establish a strong footing in the AI industry as it is one of the few firms with a foundational AI model. The firm is operating on all three layers of the AI stack, from designing semiconductors to providing a platform for businesses to develop AI products and services. “Amazon’s high-margin businesses continue to allow Amazon to drive greater profitability while still continuing to invest,” believes Morgan Stanley. It adds that “Advertising serves as a key area for both further growth potential and profitability flow-through.”
Albyn Capital Management mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter. Here is what the fund said:
“In his annual letter to shareholders, CEO Andy Jassy underscores Amazon’s commitment to “primitive services” over the last 20 years – creating foundational building blocks that empower rapid development of higher level products and services. Examples include developing core functionalities like payments and search, which eventually led to the Fulfilled by Amazon service, or developing logistics infrastructure, which led to the Buy with Prime service. Amazon is adopting the same approach to the next front, GenAI, from custom AI chips and training/deployment services to empower companies to construct their own core GenAI models, to their Bedrock service which allows customers to use pre-existing models to more quickly develop applications, to Amazon developing their own applications for internal use (think Alexa and a new shopping AI called Rufus).
Amazon’s dominance comes not just from its scale but also from a relentless “customer obsession,” exemplified by its focus on building services that empower customers. This positions Amazon to capture significant shares of the growing retail and cloud markets. With a 45% share of online retail, which only makes up 25% of total retail sales, Amazon is well-placed for growth. The company’s expansion into the grocery sector, backed by investments in same-day delivery, shows promise. Currently, Amazon holds a 20% share of the grocery market, a segment that constitutes 34% of US retail sales but is only 12% penetrated. As online retail trends towards 40-50% penetration, Amazon’s growth potential is meaningful. Similarly, in the cloud sector, only 10% of IT spending has shifted to the cloud, with AWS holding a 35% market share.”
