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Do You Think Amazon.com (AMZN) is a Good Long-Term Bet?

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Lakehouse Capital, an investment management firm, has released its October 2022 “Lakehouse Global Growth Fund” monthly letter. A copy of it can be downloaded here. October was a busy month for the fund, and it returned 3.4% net of fees and expenses, compared to a return of 6.6% for the MSCI All Country World Index. Additionally, please see the fund’s top five holdings for its top picks in 2022.

Lakehouse Capital discussed stocks like Amazon.com, Inc. (NASDAQ:AMZN) in the October 2022 Monthly Letter. Seattle, Washington-based Amazon.com, Inc. (NASDAQ:AMZN) provides consumer products and subscriptions. On November 14, 2022, Amazon.com, Inc. (NASDAQ:AMZN) stock closed at $98.49 per share. Amazon.com, Inc. (NASDAQ:AMZN)’s one-month return was -15.36% and its shares have lost 44.37% of their value over the past 52 weeks. Amazon.com, Inc. (NASDAQ: AMZN) has a market capitalization of $1.005 trillion.

Lakehouse Capital made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2022 letter to investors:

“The most important position of the Fund, Amazon.com, Inc. (NASDAQ:AMZN), reported strong quarterly earnings with net sales up 15% year-over-year (19% in constant currency) to $127 billion. However, the business is not without its challenges and the company is seeing growing macroeconomic pressures on both retail and Amazon Web Services (AWS), which has resulted in a fourth quarter forecast lower than previous expectations. . As has been the case in recent quarters, profitability also remains under pressure due not only to external macroeconomic factors, such as high shipping and fuel costs, but also to lower productivity and maintenance costs. efficiency due to some overcapacity on the back of its recent investment cycle. While this creates some near-term uncertainty, we continue to believe that Amazon is well positioned to manage these issues and remains on track to significantly improve earnings over the next twelve months.

Besides e-commerce, the other two most critical segments, AWS and advertising, grew 28% and 30% year-over-year, respectively. While AWS growth remains healthy, especially given its scale, this is a noticeable slowdown from last quarter’s 33% growth. Management attributed the deceleration to the fact that it sees a growing number of customers who want to control their cloud computing costs as the economy slows, and the company is proactively helping them upgrade to higher storage or lower instances, while leveraging its own AWS Graviton Chips. In our view, the current pressures facing Amazon are largely macroeconomic and not fundamental. We think they will prove manageable over time and the long-term risk/reward ratio is very compelling at these levels. As such, we remain patient holders and also note that the valuation is currently the most attractive since the GFC at 5x gross profit on a rolling basis.

Amazon

Amazon

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Amazon.com, Inc. (NASDAQ:AMZN) is #2 on our list of the 30 most popular stocks among hedge funds. According to our database, 252 hedge fund portfolios owned Amazon.com, Inc. (NASDAQ:AMZN) at the end of the second quarter, up from 271 in the prior quarter.

We discussed Amazon.com, Inc. (NASDAQ:AMZN) in another article and shared the list of the best 52-week low stocks to invest in. hedge funds and other leading investors.

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Disclosure: none. This article originally appeared on Insider Monkey.

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