Ritholtz Wealth Management’s Josh Brown recently purchased additional shares of Amazon.com Inc (NASDAQ:AMZN). He believes that the stock is on track to reach new all-time highs.
Key Details: Brown has been a long-term shareholder of Amazon. Although the stock has shown little movement in recent times, Brown anticipates a change in its trajectory soon.
Brown stated on CNBC’s “Fast Money Halftime Report” that, “The rationale here is that Amazon is poised to become a significant player in AI. Despite the hype around AI diminishing, it’s undeniable how crucial Amazon will be. However, the stock doesn’t rely solely on the AI narrative to trade higher.”
According to Brown, Amazon’s gross profit has been compounding at a 20% CAGR since Q3 2020, despite the stock remaining mostly stagnant during that period.
Brown also highlighted the growing importance of Amazon Web Services (AWS) to the company’s revenue. While AWS accounted for approximately 10% of total revenues at the end of 2020, it represented 17% of revenues in the most recent quarter.
Brown stated, “That’s important because it helps the EBITDA margin grow. AWS is the most profitable business they operate. Last quarter, the EBITDA margin surpassed all pandemic-era quarters except for Q1 2021.”
Additionally, Brown mentioned that Amazon’s current valuation is lower than it has been for the majority of the past three years, and the company’s fundamentals are improving.
Brown concluded, “I believe we have seen the lowest points in valuation, and if Amazon can continue executing, the stock should rise. While I don’t expect it to double from these levels, there’s no reason why we couldn’t reach previous highs of around $180 to $190 based on existing fundamentals.”
AMZN Price Action: Amazon shares closed Tuesday down 1.68% at $137.63, according to Benzinga Pro.
Photo: courtesy of Amazon.