Ritholtz Wealth Management’s Josh Brown bought more Amazon.com Inc AMZN stock this week. He expects it to start heading back toward all-time highs.
What To Know: Brown has been an Amazon shareholder for years. The stock hasn’t really done much in recent memory, but Brown expects that to change soon.
“The rationale here is that Amazon is going to be an important player going forward in AI. Even as that theme is cooling off a little bit, it’s undeniable how critical they’ll be. But it’s a business that doesn’t need the hype of AI in order for the stock to trade higher,” Brown said Tuesday on CNBC’s “Fast Money Halftime Report.”
Amazon’s gross profit has been compounding at a 20% CAGR since the third quarter of 2020, he said: “Even though the stock has done nothing or been down most of that time.”
At the end of 2020, Amazon Web Services represented about 10% of total revenues. As of last quarter, AWS represented 17% of revenues, Brown said.
“That’s important because that helps the EBITDA margin grow. That’s the most profitable business that they’re in, obviously. EBITDA margin as of last quarter is now higher than all pandemic era quarters except for Q1 2021,” Brown said.
Amazon is also cheaper than it has been for most of the last three years and fundamentals are improving, he said.
“I think we’ve seen troughs in the valuation here and I think if they can continue to execute, this stock should be higher. It’s not a rocket ship, I don’t expect it to double from these levels, but there’s no reason why we couldn’t get back to the old highs of about $180, $190 just based on existing fundamentals,” Brown said.
AMZN Price Action: Amazon shares closed Tuesday down 1.68% at $137.63, according to Benzinga Pro.
Photo: courtesy of Amazon.