We recently compiled a list of 10 Best Internet Content Stocks to Buy. In this article, we will look at where Amazon.com, Inc. (NASDAQ:AMZN) ranks among the best internet content stocks.
According to Grand View Research, The global digital content creation market value stood at $25.6 billion in 2022 and is projected to grow at a CAGR of 13.5% from 2023 to 2030. In 2023, North America dominated the digital content market. The primary drivers are the increasing use of social media and the digital change occurring across different industries. According to a study by Kepios, 62.3% of individuals in the entire globe use social media. As of April 2024, the average daily usage is 2 hours and 23 minutes per this study. Kepios analysis reveals that the number of people using social media grew meaningfully during the first three months of 2024, and annual growth rates are still significantly more than 5%.
Content creation is also being transformed by artificial intelligence. According to Custom Market Insights, the global market for AI-powered content creation was valued at $2.3 billion in 2024 and is projected to grow at a compound annual growth rate of 7.7% to reach USD 7.9 billion by 2033. Moreover, AI programs like GPT-4 are being used to generate graphics, music, and text. Gartner projects that 30% of all digital content will be artificial intelligence generated by 2025. This facilitates hyperpersonalization, which allows material to be personalized to specific consumers while also streamlining the content creation process.
Secondly, the popularity of short-form video material is skyrocketing, emerging as a major trend in the content production industry. Platforms like Instagram Reels and TikTok have paved the way for this movement. In 2024, 85% of marketers anticipate short-form videos to be the most successful type of social media content, according to a HubSpot survey. The snackable aspect of this format makes it ideal for grabbing the attention spans of increasingly transient internet consumers.
Thirdly, digital content is projected to become more interactive in the future. Advancements in virtual reality (VR) and augmented reality (AR) are opening up greater opportunities for immersive experiences. The AR and VR market is expected to reach $1.5 trillion by 2030, according to a PwC report.
If we take a broader view, according to the PWC’s Global Entertainment & Media Outlook 2024-2028, there are a number of significant growth prospects in the industry, which is expected to reach US$3.4 trillion by 2028. Notwithstanding persistent upheavals and the necessity of reinventing company models, the industry presents substantial income opportunities. Growth is anticipated to be driven by advertising, with spending forecast to reach US $1 trillion by 2026 because of connected TV and internet advertisements. Due to market saturation, streaming services are being forced to investigate ad-supported business models and creative content. Revenues from gaming are predicted to surpass $300 billion by 2028, particularly in Asia Pacific. The industry is still thriving. Companies navigating shifting market dynamics will find more opportunities in high-growth regions and market categories.
Methodology:
We sifted through holdings of Internet Content ETFs and online rankings to form an initial list of 20 Internet Content stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
The most renowned online store and marketplace for independent contractors is Amazon.com, Inc. (NASDAQ:AMZN). Approximately 75% of overall revenue is generated by retail, with the other 15% coming from services offered by Amazon Web Services, including databases, cloud computing, storage, and other services, and the remaining 5% to 10% from advertising. Germany, the UK, and Japan are the top three overseas markets for Amazon’s non-AWS sales, which account for between 25% and 30% of total revenues.
Amazon leads the market in the categories it covers, especially e-commerce and cloud services. Owing to its scale and reach, it has emerged as the clear leader in e-commerce and enjoys a variety of competitive advantages that give buyers the best selection of reasonably priced goods available. Despite its modest size, the company is increasing its market share and pursuing the long-term trend of e-commerce. Through Prime, which links Amazon’s e-commerce initiatives, customers who make more frequent purchases from Amazon’s properties consistently generate high-margin recurring revenue. In return, customers get exclusive video content, one-day shipping on millions of items, and other perks that attract both buyers and sellers and create a potent positive feedback loop. The Kindle and other gadgets, which encourage both new users to join and existing ones to stay, further reinforce the ecosystem.
Alger Spectra Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 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 strong fiscal first-quarter results, with revenues and operating income beating analyst estimates. Notably, AWS revenue growth accelerated, 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.”
It is also the “Large Cap Stock Jim Cramer Can’t Stop Talking About.” He says:
“We recently bought more Amazon shares because I believe the market was too harsh on their last quarter. Amazon is a buy, and I think it will continue to perform well.”
The rise of Prime Video content and increased ad revenue has led Evercore ISI to raise its price objective for the company from $225 to $240 while maintaining an Outperform rating for the shares. The company’s shares are still considered the analyst’s “Number 1 Large Cap Long” on the Internet. A potential $3 billion to $5.9 billion in increased revenue from APV might support Amazon’s ad growth in 2025.
Ken Fisher’s Fisher Asset Management is the largest shareholder in the company from among the funds in Insider Monkey’s database. It owns 43,780,397 shares worth $8.46 billion as of Q2.
Overall AMZN ranks 1st on our list of the best internet content stocks to buy. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some 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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Disclosure: None. This article is originally published on Insider Monkey.