Analysis of Amazon’s financial performance and valuation; Meta Platforms must demonstrate effectiveness of its artificial intelligence technology

In the email sent yesterday, Amazon’s (AMZN) earnings report was mentioned, with the anticipation of a stellar quarter. Amazon did not disappoint, as the shares soared over 12% the following morning. This success comes as no surprise as Amazon has been a top pick for a long time, alongside Alphabet (GOOGL) and Meta Platforms (META), which were also covered in the recent email.

Looking back to April 17, 2019, Amazon, along with two other companies, was named as a core holding in the Empire Investment Report. Since then, Amazon’s stock has risen by 165%, outperforming the S&P 500 Index. The third-quarter earnings report for Amazon was quite impressive, with net sales exceeding expectations at $180.2 billion, boasting a 13% year-over-year growth rate.

Of particular note was the exceptional performance of Amazon Web Services (“AWS”), which achieved 20% revenue growth. Additionally, advertising revenue, a segment that contributes significantly to net sales, surged by 24% year-over-year to $17.7 billion. The company also provided solid guidance for the fourth quarter, projecting revenues of $206 billion to $213 billion, with operating income estimated to be between $21 billion to $26 billion.

Regarding valuation, Amazon’s current price and EPS estimates indicate a rich multiple of 34.5 times current-year earnings. However, given the company’s dominance and strong potential for revenue and profit growth, this premium valuation is deemed justified. Barring any unforeseen economic downturn, Amazon is expected to maintain its double-digit revenue growth and achieve over 20% annual profit growth in the years to come.

Shifting focus to Meta Platforms, recent concerns have been raised regarding the company’s heavy investments in artificial intelligence (AI) and whether they will yield positive results. Despite Meta’s aggressive investments in AI and Zuckerberg’s cost-cutting measures, investor skepticism persists. The company’s latest results and market reaction following earnings indicate that the unlimited faith investors have placed in Meta may have a time limit.

A notable event to mention is the annual “Pick-A-Ticker Competition” organized by Robin Hood, allowing participants to donate $10,000 and submit stock ideas for tracking over six months. Last year’s winner, Bill Ackman of Pershing Square, achieved a return of 352.5% with his picks. The deadline for this year’s competition is today, offering a chance for new entrants to participate and contribute to a worthy cause.

On a personal note, the author expresses excitement for his upcoming 59th birthday and participation in the New York City Marathon this weekend. Describing his last-minute decision to run and diligent training efforts, he shares a photo with his race bib and enthusiastically requests support and good luck wishes. Additionally, he extends Halloween greetings from his beloved pets, Rosie and Phoebe.