Why Now Is the Time for Us to Initiate an Amazon Position
The Big Tech firm is poised best among its peers to benefit from the advent of AI.
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Some readers may recall that earlier this week, I addressed Berkshire Hathaway’s (BRK.A), (BRK.B) exit form Magnificent Seven and Sarge-folio name Amazon (AMZN).
Back on April 29, Amazon reported the firm’s first quarter financial results. For that quarter, Amazon posted a GAAP EPS of $2.78 on revenue of $181.519 billion. That earnings number beat Wall Street’s expectations by more than $1 per share. The sales print beat Wall Street by more than $4 billion and was also good for year-over-year growth of 16.6%. This was the firm’s fastest pace of growth since Q2 2021.
Looking into the quarter reported, AWS generated sales growth of 24% to $37.587 billion (+24%), beating expectations. AWS also produced an operating income of $14.161 billion (+23%), which simply crushed Wall Street’s view. The firm’s new custom chips are a driver as well.
There was an “intentional” problem. Amazon generated operating cash flow of $26.032 billion. Out of that number came capex spending of $44.203 billion, leaving “free” cash flow of -$18.171 billion. As I mentioned in that earlier piece, this negative result was not unexpected. In my opinion, this firm has the most to gain, among the mega-caps, from the advent and adoption of AI. Amazon will benefit greatly from the apparent reduction in overhead that AI will produce. This will ultimately increase margins.
AMZN broke out from a $259 pivot in late April, created by a rectangle pattern. Relative strength is strong, but nowhere near being technically overbought. The daily MACD is now postured bearishly. This is a concern, but if one has some conviction, weakness, which we have seen of late, is when we strike. My target price for AMZN in the Sarge-folio stands at $324. That will be my target here as well.
Portfolio News
Ondas Inc (ONDS)
On Monday, analyst Matthew Galinko of Maxim Group reiterated a buy rating on ONDS along with his $22 target price. Galinko is rated at five stars out of five at TipRanks. Over the past two years, he has a 46% success rate, but with an average return of 30.9%.
On Tuesday, analyst Michael Latimore of Northland Securities reiterated a buy rating on ONDS along with his $18 target price. Latimore is rated at five stars out of five at TipRanks. Over the past two years, he has a 38% success rate, but with an average return of 23.6%.
Upcoming Portfolio Earnings
Planet Labs (PL) after the closing bell on Thursday, June 4
Tuesday’s Intentions vs Tuesday’s Actual Trades
Intention: Buy 100 shares of (SNAP) at or close to the last sale of $5.61
Actual trade: Bought 100 shares of SNAP at $5.63
Intention: Sell (write) two SNAP October 16 $6 calls for $0.85 a piece or more
Actual trade: Sold two SNAP October 16 $6 calls at $0.87
Tuesday’s Intentions
I am ridding the portfolio of Mobileye (MBLY) as I have been wondering for weeks why it was even still here. We’ll be selling those shares for an approximate 8.3% profit.
– Sell 25 shares of MBLY at or close to $9.66, closing the position
– Purchase 2 shares of AMZN at or close to the last sale of $264
Current Positions
Long 60 shares of (EVLV) at $5.9895. Target price: $8.50. Last sale: $5.94.
Long 25 shares of MBLY at $8.92. Last sale: $9.66.
Long 150 shares of (OCUL) at $8.305. Last sale: $8.28.
Short one OCUL $11 September 18 call at $1.65, Last sale: $1.15.
Long 125 shares of ONDS at $9.4749. Target price: $14. Last sale: $9.49.
Long 10 shares of (PL) at $37.18. Target price $47. Last sale: $43.14.
Long 12 shares of (PLTR) at $140.30. Target price: $194. Last sale: $135.63.
Long 7 shares of (RKLB) at $62.6157. Target price: $132. Last sale: $132.62.
Long 125 shares of (SIDU) at $2.725. Target price: $6. Last sale: $3.64.
Long 200 shares of SNAP at $5.7642. Target price: $7.50. Last sale: $5.57.
Short two SNAP October 16 $6 calls at $0.87. Last sale: $0.85.
Long 175 shares of (SOFI) at $15.9573. Target price: $24. Last sale: $15.64.
Short one SOFI August 21 $20 call at $1.02. Last sale: $0.73.
Long 45 shares of (VELO) at $12.0136. Target price: $20. Last sale: $17.00.
Cash: $698.85
Portfolio value: $11,424.40, +14.2% from inception on March 24.
At the time of publication, Guilfoyle was long EVLV, MBLY, OCUL, ONDS, PL, PLTR, RKLB, SIDU, SNAP, SOFI and VELO.
