Cathie Wood and Warren Buffett, two prominent investors with contrasting investment strategies, have both taken an interest in Amazon, a tech giant known for its diverse business segments. Despite their differences, Wood’s Ark Invest and Buffett’s Berkshire Hathaway own positions in the company. Amazon’s multifaceted platform, which includes e-commerce, cloud computing, subscription services, and entertainment, has shown resilience even in a challenging macroeconomic environment.
The company has witnessed growth across its entire platform, with its cloud computing business, Amazon Web Services (AWS), accelerating materially compared to the previous year. In addition to its steady top-line growth, Amazon has seen significant increases in operating income and free cash flow. For the trailing 12-month period ended June 30, the company’s operating income increased by 207% year over year to $54.4 billion, while free cash flow rose by 572% to $53 billion.
Despite its strong performance, Amazon’s valuation remains attractive. The company currently trades at a price-to-free-cash-flow (P/FCF) multiple of 41.2, which is about half of its 10-year average P/FCF of 82.1. This discounted valuation, coupled with Amazon’s ability to leverage artificial intelligence (AI) across its various operating segments, makes the stock a compelling opportunity for long-term investors.
Cathie Wood invests in Amazon
While some investors are cautious about rising competition in the cloud computing arena and uncertainties surrounding the macroeconomy, these concerns appear short-sighted given Amazon’s strong position and continued growth across its business segments. As Cathie Wood continues to advocate for investments in AI-related companies, her fund, ARK Invest, has faced criticism for its performance. Since its pandemic peak, ARK Invest has seen a significant decline in shareholder value.
However, Wood remains optimistic about the potential of AI, comparing the current era to the railroad era of more than a century ago. Recently, Wood’s Ark Autonomous Technology & Robotics ETF purchased 20,883 shares of Amazon worth $3.9 million, demonstrating her continued interest in the company. Amazon’s stock price has risen 17% since early August, and the company is expected to benefit from the increasing demand for cloud computing services driven by the growth of AI applications.
In conclusion, the mutual interest from major investors like Cathie Wood and Warren Buffett highlights Amazon’s enduring potential. The company’s diverse revenue streams, strong growth metrics, and significant advancements in AI make it a compelling investment opportunity, particularly given its current valuation.
