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Amazon Might Be the Most Underrated Stock in Tech

The Compound · 2m · transcribed 7d ago
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Section Insights

# 0:00

Overview of the Stock's Performance

What is the current status of the stock and its recent performance?

The stock has been overlooked for a while but has shown improvement this year, particularly after a strong quarterly report from AWS.

  • The stock is up this year but not generating significant excitement.
  • AWS growth accelerated from 24% to 37% quarter over quarter.
  • The recent quarterly performance is a positive indicator for the stock.
# 1:02

Market Perception and Comparisons

How does Amazon's valuation compare to its competitors?

Amazon's stock is currently valued at a lower multiple compared to Alphabet and Microsoft, despite its strong performance.

  • Amazon's trailing price-to-earnings ratio is lower than its competitors.
  • The market may not fully recognize Amazon's growth potential.
  • Comparative analysis with Alphabet and Microsoft highlights Amazon's undervaluation.
# 1:34

Understanding Valuation Multiples

Why is Amazon's valuation multiple lower than its competitors?

Amazon's business model is more capital-intensive due to its physical assets, which may contribute to a lower valuation multiple.

  • Amazon's operations involve significant physical infrastructure, impacting its valuation.
  • Investors may undervalue companies with heavy capital requirements.
  • The lower multiple could represent an opportunity for investors.
# 2:05

Investment Perspective

What is the speaker's view on Amazon as an investment?

The speaker believes Amazon is an undervalued stock that deserves more recognition from investors.

  • The speaker sees potential in Amazon due to its strong fundamentals.
  • There is a belief that the market is not giving Amazon the credit it deserves.
  • Personal investment in Amazon influences the speaker's perspective.

Transcript

0:00 This has been a forgotten stock for a long time. It's It's okay. It's up on the year. It's not setting anyone's heart on fire, but I like the setup. And last quarter when they reported, the July quarter, was fantastic. AWS accelerated from 24% to 37% quarter over quarter, and that's really the thing that moves the stock as I'm going to make the case. But let's just start with a baseline. Give me this first chart. I'm showing you the three-year and that stair-step pattern below is the earnings per share. And this company's earnings per share is absolutely exploding, and the stock price has given given you nothing as a result of that.

0:45 And I like that setup because sometimes in markets and in life, there's a delayed reaction. You don't always get credit for the things that you're doing in the moment. And we have seen that with technology stocks, and we have seen that in our own lives. It's just a It's just part of the deal. Sometimes you got to toil away in the dark before anybody says, "Wow, that dude's really doing something." And I And I think that's Andy Jassy.

1:13 >> really is growing back, that son of a >> That's why I didn't get much credit for my hair until this summer when it turned white in the sun, and then all of a sudden people noticed. This is price to trailing cash flow, and I'm showing you this for a reason I'm about to illustrate. But what I want you to look at is the Amazon versus Alphabet versus Microsoft comparison. Amazon is in baby blue. It is now selling at a multiple. This is trailing 12 months. 16.6 times.

1:39 Microsoft is 20.9. Alphabet is 21.6. So this is of the three hyperscalers with the three largest cloud businesses in the world, this is by far the lowest multiple that investors are paying. And I think I know why. I think this is the most physical of the three businesses. It's got supermarket It's got trucks and vans that prowl my neighborhood day and night. It's got logistics facilities. It's it's got robots, millions of robots. It's got physical things that hold back the multiple because it's more capital intensive perhaps than the others. I think that's a discount.

2:26 I think it's an under appreciated stock. Not just because I own it. I just think that people are not giving this company the credit. >>

Summary

The speaker discusses a stock that has been overlooked despite showing strong earnings growth, particularly in its AWS segment, which has seen significant acceleration. They argue that the stock's current valuation is attractive compared to its peers, suggesting that the market has not yet recognized its potential.

- The stock has been relatively stagnant but shows promise due to strong earnings growth.
- AWS growth accelerated from 24% to 37% quarter over quarter, which is crucial for the stock's performance.
- The company's earnings per share are increasing significantly, yet the stock price has not reflected this growth.
- The speaker believes in delayed market reactions, where positive developments may not be immediately recognized.
- Amazon's current valuation is lower than competitors like Microsoft and Alphabet, with a trailing cash flow multiple of 16.6.
- The physical nature of Amazon's business, including logistics and infrastructure, may contribute to its lower valuation.
- The speaker views this as an undervalued opportunity in the market.

Questions Answered