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Of the large-cap tech stocks in Vestact's portfolio, Amazon has been the worst performer since the market highs at the end of 2021.
Whereas Apple, Microsoft and Nvidia are trading back near their all-time highs, Amazon is still down 44% from its peak. That's awful, especially for the people that bought them at the top!
The first quarter results out from Amazon last week were very good. They are on track to rack up half a trillion dollars in annual revenue. Operating income jumped 30% from a year earlier to $4.8 billion, smashing the $3.1 billion expected by analysts.
The share price has softened in recent days though, probably because their profitable cloud business AWS is growing at a reduced rate. In addition, the retailing operation has lost money for the past six quarters. We believe that the management team is about to turn that around, after many steps to right-size their workforce and distribution centre set-up.
The highlight of the results was the excellent growth of the Amazon Ads business. That will bring in $40 billion of revenue and generate at least $25 billion of free cash flow in 2023. They are building tools for third-party resellers to increase sales on the Amazon platform, and other systems for companies that don't even sell on Amazon, like car and health insurers.
We are very happy to accumulate more Amazon shares at this price. Under CEO Andy Jassy, they are set to prosper. We expect the remaining two-thirds of this decade to suit them very well.
