1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 286
Robert Schein, Chief Investment Officer at Blanke Schein Wealth Management, said in a latest program on CNBC that Amazon.com Inc (NASDAQ:AMZN) will lead the Mag. 7 group this year amid several growth catalysts:
“Amazon.com Inc (NASDAQ:AMZN) really going to take the baton this year, and there are several reasons for that. We see continued operating margin expansion—last quarter was up 11%, recovering from a low of 2% at the end of 2022. They’re also leaning into faster-growing, higher-margin segments like AWS and advertising. Then, when we factor in and layer on another segment, which is the AI business, that could grow potentially three times faster than what we would see in just the AWS side alone. So, we expect 20% earnings growth from Amazon.com Inc (NASDAQ:AMZN) over the next five years for that reason.”
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.
Ariel Appreciation Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
During the quarter, we initiated three new investments, each in companies we have followed closely for a considerable time. At various points, we viewed them as missed opportunities; however, our experience with Mr. Market has taught us that patience often creates inevitable entry points. This quarter, some exciting opportunities presented themselves. The three investments are Amazon.com, Inc. (NASDAQ:AMZN), Diageo (NYSE:DEO), and Uber (NASDAQ:UBER). We will discuss each in detail below.
Amazon is one of the most widely followed companies in the world. While the “Magnificent 7” (of which Amazon is a key member) is often seen as a runaway freight train, we were able to purchase Amazon shares at prices last seen in 2021—three years ago. How is this possible if the “Mag7” has been so dominant? We believe it largely reflects the increasing prevalence of narratives driving market sentiment…” (Click here to read the full text)
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 timeframe. 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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