Is the Upside Worth the Risk in Amazon Stock Right Now in October? | AMZN Stock Analysis
Summary
Parkev argues that Amazon's recent performance demonstrates high efficiency, as the company has managed to increase its return on invested capital (ROIC) to record levels even as its total assets surpassed $1 trillion. Parkev notes that the majority of these investments are directed toward AWS and AI infrastructure, which yields much higher margins than the e-commerce business. Parkev emphasizes that Amazon's AWS growth has accelerated for five consecutive quarters, reaching 36.7% in the most recent report, supported by a $496 billion backlog from major clients.
Parkev acknowledges the risk of negative free cash flow, projecting -$34 billion this year and -$5.6 billion next year due to aggressive capital expenditures. However, Parkev expects these investments to plateau by 2028. Parkev views the forward P/E ratio of 24 as very attractive and mentions that he recently doubled his personal position in the stock.
Mentioned Stocks
Reasoning: Parkev rates Amazon as a top buy because of the accelerating 36.7% growth in AWS and a record-high return on invested capital. Parkev calculates a fair value of $296 per share, whereas the market price is around $253. Parkev explicitly stated that he recently doubled his position in the stock because the valuation at a forward P/E of 24 is highly attractive given the 20% revenue and 43% operating income growth.