Cathie Wood and Warren Buffett are two well-known investors with differing approaches to investment, yet both have shown interest in Amazon, the tech powerhouse recognized for its wide-ranging business operations. Despite their distinct styles, Wood’s Ark Invest and Buffett’s Berkshire Hathaway hold positions in the tech firm. Amazon’s diverse platform, encompassing e-commerce, cloud services, subscription offerings, and entertainment, has proven resilient even amidst a tough macroeconomic backdrop.
The company has experienced growth throughout its extensive platform, with its cloud computing segment, Amazon Web Services (AWS), making significant strides compared to the prior year. Beyond consistent revenue growth, Amazon has recorded notable increases in operating income and free cash flow. For the 12-month period ending June 30, the company’s operating income surged 207% year over year, reaching $54.4 billion, while free cash flow skyrocketed 572% to $53 billion.
Even with its impressive performance, Amazon’s valuation is still appealing. It now trades at a price-to-free-cash-flow (P/FCF) ratio of 41.2, roughly half of its 10-year average P/FCF of 82.1. This lower valuation, along with Amazon’s capacity to harness artificial intelligence (AI) throughout its operational areas, presents a persuasive opportunity for investors looking at the long term.
Cathie Wood’s investment in Amazon
Despite some investors being wary of increasing competition in the cloud computing space and the uncertainties tied to the macroeconomy, these worries seem short-sighted given Amazon’s robust position and ongoing growth across its business divisions. Cathie Wood champions investments in companies related to AI, although her fund, ARK Invest, has come under fire for its financial performance. Since its peak during the pandemic, ARK Invest has experienced a significant drop in shareholder value.
Nonetheless, Wood maintains an optimistic view on the prospects of AI, likening current developments to the railroad boom over a century ago. Recently, her Ark Autonomous Technology & Robotics ETF acquired 20,883 shares of Amazon valued at $3.9 million, underlining her ongoing commitment to the company. Since early August, Amazon’s stock price has appreciated by 17%, and the firm is predicted to benefit from the rising demand for cloud computing services propelled by the expansion of AI applications.
In summary, the shared interest from prominent investors like Cathie Wood and Warren Buffett underscores Amazon’s lasting potential. The company’s various revenue streams, robust growth metrics, and noteworthy advancements in AI render it an attractive investment opportunity, particularly in light of its current valuation.
