1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 339
New Street Research updated its outlook on Amazon.com, Inc. (NASDAQ:AMZN)’s stock, with analyst Dan Salmon raising the price objective to $280 from $234. The analyst has emphasized AWS as a critical driver for the company’s future financial performance. The updated price target stems from a combination of increased projected revenues and operating margins from AWS. In the recent Q4 2024 earnings call, Amazon.com, Inc. (NASDAQ:AMZN)’s management highlighted spending $26.3 billion in capex. As per the call, it reasonably represents what one can expect in an annualized capex rate in 2025. Notably, the vast majority of that capex spend is on AI for AWS.
Amazon.com, Inc. (NASDAQ:AMZN) remains significantly focused on AI. In AWS, improved AI capabilities can result in the development of new, high-value services attracting enterprise customers and increasing the revenue per user. The integration of AI into the company’s e-commerce platform can improve personalization, resulting in higher conversion rates and customer loyalty.
Through making continuous investments in AI, Amazon.com, Inc. (NASDAQ:AMZN) continues to place itself as a leader across multiple high-growth areas for the next decade, including advertising, cloud computing and automation. The company continues to improve its AI assistant, Alexa, and rolled out the Rufus shopping assistant as well as the Nova AI model. RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, released its Q4 2024 investor letter. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN): Amazon was our top contributor in the fourth quarter following third quarter results of slightly better than expected revenue and much stronger than expected operating income. 3Q operating income of $17.4 billion exceeded company guidance of $11.5-15 billion (and Street estimates of $14.7 billion), driven by margin expansion across all three major segments, including gross/net margins of 38% at AWS, up from 30%. In addition, the company reported an acceleration in e-commerce demand both domestically and internationally, and accelerated growth of Prime paid memberships. The company guided to 4Q operating income of roughly $18 billion driven by the same positive factors that impacted 3Q.
With its ability to continue its market share gains in its three leading businesses (e-commerce, web services and online advertising), plus a multi-year operating margin expansion opportunity (from improved e-commerce margins and greater contribution from the faster growing, higher margin AWS and advertising segments), we believe Amazon remains one of the best-positioned global growth companies in the world.”
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. 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 the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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