2. Amazon.com, Inc. (NASDAQ:AMZN)
Citadel Investment Group’s Stake Value: $574,116,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.11%
Number of Hedge Fund Holders: 271
Ken Griffin’s Citadel Investment Group owned 176,112 shares of Amazon.com, Inc. (NASDAQ:AMZN) in the first quarter of 2022, worth over $574 million, representing 0.11% of the total 13F holdings.
After Amazon.com, Inc. (NASDAQ:AMZN) reported a commercial agreement with Just Eat Takeaway.com that will offer American Prime members a free, one-year Grubhub+ membership, Baird analyst Colin Sebastian observed that the deal was a “capital efficient way for the company to re-enter the local restaurant delivery market”. He subsequently maintained an Outperform rating and a $145 price target on Amazon.com, Inc. (NASDAQ:AMZN) shares.
According to Insider Monkey’s database, Amazon.com, Inc. (NASDAQ:AMZN) was part of 271 hedge fund portfolios at the end of Q1 2022, compared to 279 funds in the prior quarter. Fisher Asset Management held a prominent position in the company, comprising 2.3 million shares worth $7.70 billion.
Here is what Hayden Capital has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2022 investor letter:
“Amazon reached a peak by the end of 1999, at a valuation of over $30BN. Considering that the company only generated $1.64BN in revenues that year (growth of 169% y/y), this equated to a valuation of 18x Price / Sales at the peak.
More notably though, was that Amazon was a pure 1P retailer at the time, meaning that they owned the inventory that they sold. Long-term margin assumptions under this business model were low, at just ~5% expected operating margins (365x implied structural operating profits).
By the time the stock bottomed in September 2001, shares were trading for ~0.7x P/S or 14x structural operating profits.
During those years, Amazon worked to reduce its operating losses and dialed back its growth investments as a result. In 2000, Amazon grew revenues by 68% y/y and reduced its cash burn from -26% operating margins to -6% by the end of the year. In its year-end 2000 earnings release, Amazon indicated that it targeted profitability by the end of 2001.
While the stock continued to decline throughout the first 9 months of 2001, the company reiterated on its 3Q 2001 earnings that it would achieve its profitability target within the next quarter. They had to dial back growth from its previous ~68% y/y in 2000 to just ~13% y/y growth in 2001, in order to cut costs and achieve this.
However, with investors focused on profitability, this period marked the turning point for the stock price, with a bottom ~$6 per share (equating to the aforementioned ~0.7x P/S or ~14x structural operating profits). Notably, based on this, the stock was able to bottom a full year before the NASDAQ index found a bottom in September 2002.
Over the next few years, Amazon’s fundamentals remained strong, with sales growing ~26% y/y in 2002 and proving to investors that the company could be profitable in such an environment. By 2003, the company was generating $5.2BN in sales and reported its first full year of profits.
Within a little over a year of bottoming, by the end of 2002, the share price had recovered 240% to ~$21 per share (equating to 1.8x P/S). By the end of 2003, the stock had recovered to a 4x P/S multiple or $21BN valuation. This equated to a ~8.5x return on the stock price in just a little over two years.”
