4. Amazon.com, Inc. (AMZN)
Eagle Capital reduced its Amazon.com position by 30% which accounted for 6.8% of the 13F portfolio at the beginning of October. It is great to see Amazon among the holdings of a traditional value investor. Most investors consider stocks growing at 20+% rates “growth stocks”. We think these stocks can also be classified as value stocks if there is a high probability that these stocks keep growing at these rates for a very long time and their current stock price doesn’t account for this growth potential. Baron Opportunity Fund talked about Amazon in its 2020 Q3 letter:
“Amazon.com, Inc. is the world’s largest retailer and cloud services provider. Shares were up on strong second quarter revenue metrics – with paid unit growth accelerating to 57%, a startling figure for a company of this scale – as Amazon benefited from recent investments in logistics and distribution to meet increased COVID-19-related demand. Amazon has the unique ability to deliver all the necessities of life safely to your doorstep, including groceries. Amazon also reported a stunning beat in operating profit, with $5.8 billion of operating income, almost six times Wall Street’s expected figure. While e-commerce penetration is rising rapidly and Amazon continues to grow its addressable market by entering new verticals, we continue to view Amazon Web Services as the more material driver of the company given its leadership in the vast and growing cloud infrastructure market and potential to compete in application software in the years to come.”
RiverPark Advisors is also bullish on Amazon. Here is what they said in their 2020 Q3 investor letter:
“Amazon: AMZN shares were a top contributor as the company again announced impressive quarterly results. Driven by the effects of the pandemic, AMZN’s year-over-year revenue growth accelerated to 40% in the second quarter, up from 26% growth for the first quarter. North American retail sales grew 43% to $55 billion, International retail sales grew 38% to $23 billion, Amazon Web Services revenue grew 29% in 2Q to $11 billion, and Amazon’s Other category, mostly driven by ad sales, grew 41% to $4 billion. With the continued acceleration in ecommerce and cloud computing adoption, management forecasted continued robust revenue growth for its third quarter, implying upwards of 33% year-over-year growth.
For the trailing twelve months, Amazon’s free cash flow grew 27% to $32 billion or $62 per share (up from $47 in the first quarter). We believe that Amazon’s revenue can grow from its TTM $322 billion to more than $800 billion annually, with free cash flow exceeding $150 per share by the end of 2025.”
