1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Investors: 286
Arun Sundaram from CFRA said in a latest program on Schwab Network that he increased his price target on Amazon.com Inc (NASDAQ:AMZN) after the latest report.
“We upgraded our target price; we went from 251 to 276 now. You know, yeah, the shares are down a little bit, but I think this is a good buying opportunity for Amazon.com Inc (NASDAQ:AMZN). Really, the report yesterday, I thought, was there was a lot of positives in there. You know, the only, I think, the two negatives in the report were one, the certainly the Q1 outlook was a little softer than expected. Amazon.com Inc (NASDAQ:AMZN) typically pretty conservative with their outlook, but this one is a little more conservative than normal. There are tariff headwinds, FX headwinds going on right now. And then the other part is that the capex spend, capex is likely to be above 100 billion in 2025. The street was expecting about 85 to 90 billion, so well above expectations there. But then again, you know, all the big tech players have announced pretty big capex increases, so that shouldn’t be overly surprising. But yeah, overall, I thought it was an overall strong report and yeah, we did raise our estimates and our target price.”
Despite weak guidance, Amazon could easily surpass $100 billion in operating income within the next two years because of its AWS growth engine. In the latest quarter, Amazon Web Services sales jumped 19% and operating profit for the segment jumped 62% in 2024 on an annual basis.
The market is currently forecasting $6.27 per share in profits this year (a 13% YoY growth) and $7.59 per share next year (a 21% YoY growth). Amazon’s stock is priced at a profit multiple of 30.2x. This valuation might look rich, but when we incorporate AWS growth, the stock seems to have more upside potential.
Alger Spectra Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a renowned online retailer and leader in cloud computing. The company’s Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America’s digital transition. During the quarter, Amazon’s shares contributed to performance as the company reported better-than-expected fiscal third-quarter results, with revenues and earnings beating analyst estimates. Operating margins expanded to 11%, driven by efficiency gains in logistics and robust AWS performance. Notably, AWS revenue growth accelerated during the quarter, along with recording its highest-ever operating margin of 38.1%, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.”
While we acknowledge the potential of Amazon.com Inc (NASDAQ:AMZN), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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