MILLIONS to be Made SOON!!?

So this stock has been on a tear lately and there's more catalysts coming this week. And according to wall street, there's a lot more upside to go with this stock. So let's take a look and see exactly what wall street saying. And actually look at, is there more opportunity here with the stock or not? Is the runabout over with we'll discuss all that right after you hit that like button, if you like getting the truth out, the hype, cause that's what you're going to get today, guys. All right. Well, it's another pick from wall street. We'll see exactly what we agree with, what we disagree with. And more importantly, I'll let you know, is there a lot more upside to the stock or not? Is it one that I want to own or not and everything else of that nature. So let's jump in the video right here. Hey, joining us now is Arun Sundaram, equity research analyst, CFRA research. Arun, thank you so much for joining us. Hope you had a great holiday weekend. Coming up, we've got black Friday in July, that big prime event this week. I know before we get into your, uh, rating on Amazon, how you view it overall, talk to me about what your expectations are for this big sales event this week. Yeah. Hey Diane. Yeah. Thanks for having me. Yeah. So, you know, it feels like every single year when Amazon, uh, launches prime day, they hit new records, uh, in terms of, uh, sales in terms of a number of deals. And, and so we expect this prime day to continue that trend. And, and, um, you know, it's interesting that, you know, prime day originally started in 2015 and it was a one day event back then. Um, and it was intended to really just celebrate Amazon's 20th birthday. Uh, but now it's kind of morphed into this major shopping extravaganza. Uh, it's amazing how some of the, uh, best revenue drivers for a company or in some cases, ideas altogether happened by accident. Uh, you know, um, especially in the drug world, that kind of seems to be what happens whenever, you know, those companies are out there trying to discover, uh, you know, medication for one thing. And then something else happens that turns into the biggest boon in the history of that company or cards of revenue and everything else profits in the whole nine. So, yep, definitely. Uh, can't disagree there. It's absolutely how these type things sometimes happen. And that's just part of business. And of course, then having the vision to go, Hey, wait, we got something here. Maybe we should do this more often than just simply anniversary date and then kind of moving away from it here. You know, prime day will be four days long up from its historical two days. Um, and it's interesting. It's coming up. It's also coming at a time where, you know, right now retailers are worried about tariffs and inventory and things like that. So I think, you know, the fact that Amazon's choosing to up up its prime day from two days to four days shows that they are well positioned from an inventory perspective. Um, I think they, yep, I agree there completely. You would be no reason to run an extended prime day if you did not have them in Tory in order to fulfill that. Um, so obviously whenever all this kicked up, they were proactive, which is what a great company does, which is why we've owned Amazon. I've owned it forever. Uh, why we consistently bought it really forever. It feels like because this is what they do. They executed on a very, very high level, not a lot of flash, not a lot of big announcements, not a lot of, uh, you know, hoopla per se, you know, they're not out there trying to be on TV. So, you know, can you even tell me who the CEO is right now? And I know a lot of folks are like, well, Bezos was well when Bezos was running the company, he wasn't really into all that sort of stuff. He was into running Amazon. It's like he kind of decided to go wild after, uh, he stepped down as CEO, which is kind of what you want from your CEO in general. So no doubt about it. Amazon is one of the best at executing planning, planning ahead years. It's one of the reasons why it trades flat for years is because they're busy in the background building out their next expansion and the wall street's busy about, Oh, what's going on this quarter. Oh, I heard a rumor about this. Oh, so-and-so is gonna, you know, eat market share, whatever the case is. No, Amazon is just ramping up for that next leg and their business, how they've done it. That's how they choose to spend the profits versus actually just spending off a lot higher cashflow, a lot higher profits than they could. It's basically because they're always putting it back in the business, making it better. You know, I can remember getting something delivered in a week from Amazon and that was amazing. You know, now you can get it delivered in an hour depending upon where you live and depending upon what you're buying. So to say that they aren't constantly trying to get better, innovate the business and of course be ahead of the curve on everything that could possibly be coming that they can foresee. No doubt. Nobody does it better than Amazon. In my opinion, they bought a lot of inventory in Q1 before purchased a lot of inventory ahead of tariff. So I think that's, you know, might be one reason why they're they're increasing this year's prime data for days. But yeah, I know. I believe that I think this year will be another record year in terms of sales for Amazon. Okay. You got a strong buy rating. You got $248 price target on Amazon. What gets it there? Yeah. So our, our, the thesis really behind our strong buy rating is, is, you know, we still think Amazon over the next few years, we'll be able to, to expand to, to, to one, um, uh, grow sales. We believe their sales will outpace, uh, peers, but we also believe that their operating margins will continue to expand. Uh, and that will translate to a free cashflow growth. Um, so if you look at this past year, for example, Yep. Agree. A hundred percent. Again, man, this guy, I rarely agree with these guys all the way across the board, but so far, that's exactly what happens when your core business, um, is a relatively low margin relative to obviously a lot of the rest of the tech world that they kind of get lumped into, but they're growing businesses. They're growing profit drivers more importantly, are all in much higher profit categories like ads, like obviously AWS, like a lot of other things that they have in the pipeline for Amazon. So it's kind of like, Hey, they're almost doing it all in reverse, right? You know, they, they start off, you know, more of a lower margin business. And then as they're expanding out, their growth is coming from high margin businesses, which of course increases margins, increases the cashflow and everything else coming into the company there. Again, just another example of a company that is just executing flawlessly. Um, you know, Amazon's operating margins are around 11%. Uh, if you, if you rewind back to 2022, they were at around two to 3% operating margins. And so they've come a long way in the past few years to improve their profitability. Uh, and I think over the next, you know, three to five years, we'll likely seek continued operating margin, uh, expansion, uh, at Amazon. And it's due to a few reasons. One, they're, uh, reducing their costs to serve in their e-commerce business. You know, they're deploying more robotics automation. Um, and at the same time, they're also delivering packages faster to the consumers. So it's been a really a win-win combination there. Uh, and then the other major driver is that, uh, Amazon's growing, it's higher margin revenue streams faster than it's lower margin revenue streams, namely the advertising business and AWS, both advertising and AWS are growing at a high teens clip versus, um, their e-commerce business is growing in the mid single digit range. So that's good for overall margins because we want those higher margin businesses to grow faster than the lower margin businesses. Yep. And, uh, agree there. Obviously he just kind of copied my answer. Obviously he said it, uh, his interviews from prior to me just saying that, but I will say this as a long-term follower and shareholder of Amazon, he's going to be in for a surprise. Whenever those margins get compressed in the future, whenever they go out for that next expansion phase in their business, where instead of putting all those higher margin profits that are coming in, basically in the profit category, they start spending that on CapEx for the next expansion out. That's exactly how they run the business. If you follow and you track it, that's exactly why you see these large plateaus and stock price. And obviously he'll be in for a surprise and going, Oh, wow. Margins were increasing and increasing. And then they just all, I don't know, maybe they dip down a little bit from what was going on before. Maybe AWS is struggling. You know, maybe ad isn't coming in as good as possible. Now you'll see that R and D and a lot of other expense categories, CapEx go up. And that just simply means they are gearing up for whatever that next phase is. Obviously we saw a lot of spend on in 2022, which he was referencing to, which was a lot of, uh, expansion of factories, expansion of robotics, expansion of a lot of other things. They actually admitted to overexpanding a little too quick, a little too fast, obviously kind of using the, um, kind of lockdown numbers moving forward as well. Maybe that's the new paradigm shift. And of course some people still went back to the store afterwards, right? After we were allowed to go to the store, some folks just wanted to go to the store. So it was a bit of a miscalculation there from their standpoint. However, it's not like that inventory and that expansion hasn't already filled in the meantime. Obviously it has, it's not like they got empty warehouses sitting out there doing nothing, costing them money. It just took a little bit longer than they had kind of planned on in regards to that. They expanded a little bit too fast. That happens from time to time. However, this guy's going to be a little bit shocked whenever AWS is at records and obviously ads will be at record revenues, record profits and everything else. But it still doesn't show all the way to that bottom line where they decide to go after their next expansion, whatever that is. So you think that AWS is key and crucial to the story, the growth story for Amazon? Oh yeah. I mean, I mean, investors, you know, they tend to focus really on the AWS number, both in terms of sales and margins. Um, and right now, you know, AWS is growing around 17%. We, we think for their, when they report their Q2 earnings will grow likely around 17%, which is consistent with Q1's growth rate. Um, and then we'll also look at the AWS margin line. You know, AWS margins have been a bright spot in recent quarters. Uh, you know, even last quarter, AWS operating margins were almost 40%. Uh, that's up from, you know, the low 30% range from a few years ago. Um, and like I said, that that's great for overall margins because, uh, AWS and advertising, those two businesses have much higher margins than, um, their Amazon e-commerce business. That's been striking some, uh, deals on the advertising front there. And do you have any concerns, what are the risks to your thesis, especially say for instance, when it comes to labor, labor costs? Yeah. I mean, uh, yeah, certainly, I mean, labor has been a headwind, uh, over the last several years, but, um, you know, I think it's been coming, it's becoming a less of a headwind, I would say over the last few years, you know, their, their, their workforce has, uh, more or less stabilized, uh, several years ago, when there was, there was a lot of turnover in the company, um, that resulted in some lost productivity, uh, at Amazon. But, um, I think those issues are behind them. Um, and, and now it's really, uh, the focus is on, on improving productivity. So, um, you know, like, like I said, this year, a big focus is on, um, automation and robotics and it's a distribution centers. Um, and that's, you know, hopefully going to lower, uh, the cost to serve, uh, Amazon and also increase delivery speeds for, uh, for prime members so that, you know, more prime members sign up for Amazon's, uh, entire ecosystem. Yeah. So I wish these guys would mention the fact that they're already ahead of that curve shows you how little they actually studied the business. And a lot of cases when we're talking about the stock specifically, Amazon's already planning for that future. Obviously the increase in cost of employees going up and going up and continuing, obviously just with the natural rate of inflation, uh, you know, wage pressures, everything else, they're already planning for that. That's why they've started going down the robotics route so hard. That's, they're obviously looking into drone deliveries. I'm sure, you know, autonomous deliveries, all kinds of other ways to keep those costs low and to not have them affect the bottom line and a fellow and also allow them to effectively get us stuff faster. I guess really in the end, those are all things that they've already been working on. They've already spent a lot of CapEx on. So it shouldn't be a surprise when these type things come up to these guys, but of course it will be a surprise. Um, and obviously it'll be something that, Oh, I'm not sure how they're going to address it, but they've already started addressing it. Amazon is just thinking five or 10 years ahead and this guy's thinking six months ahead, maybe at the max three months, six months, you know, maybe a year we're being really, really generous here. But that right there is the difference between a wall street person who's looking for a trade and to get in and out of a trade versus a company like Amazon that's thinking longterm. And of course us here as longterm buying, whole investors, it's exactly what we're paying attention to as a company. Who's not, I don't want to sacrifice short-term profits and short-term stock gain for long-term growth and incredible profits and incredible stock gains in the future. That's something that us as retail fall into that trap all the time. We want everything right now because we all want to get rich quick. And the reality is, is always ends up being fool's gold in the end. And you end up with a dud in the end because everybody looks back in hindsight and says, Oh, I would've gotten out here. I would've gotten out there. I would've done this. I would've done that. We all do that. I do that too. But I know the reality is most likely not going to happen. You might be one of the lucky few. Sure. Absolutely. But you know, I'll be in the 95% and most of you guys out there will be in the 95% that won't make those decisions like that. And so we'll end up losing if we play that game. That's why I don't play that game at all. I know you mentioned that you, that your view is that the reason that they're doing four days is they have enough inventory to meet demand. Is there any concern that some of that is because the consumer is more fatigued and so they need a sale to move the needle? Yeah. I mean, I think that's been the case for the last few years now that, you know, consumers have been more deal focused and, and, and this is not an Amazon phenomenon, but for, for most of these major retailers, yeah, let me help out with that. Um, it's called we didn't get a bunch of free money after like a year. And once we burned through all that free money, you had to go back to being conscious about, uh, pricing and wanting deals and stuff like that. Uh, that one's pretty simple, uh, to figure out there in regards to happening at that time when the money was flowing freely a few years ago. Um, and too much money was out there. Interest rates were at zero. I mean, literally people didn't care what they paid for it. And more importantly, there was a shortage with inventory. Obviously we had all the supply chain issues and everything else. And that just created a scenario where they just kind of said, Hey, lots of companies said in the earnings call, yeah, we can just continue to raise our prices and our customers don't blink. They continue to buy at record pace. And that's exactly what happened to us. Um, so of course, once we aren't in that sort of environment anymore, the consumer is going to go back to their normal behavior, which is generally speaking, pretty cost conscious, waiting on a deal, waiting on a sale, whatever the case is. Very, very, uh, different. I was kind of an anomaly time there. So anybody thinking that's going to get a repeat of that, that's going to be really, really hard to do to me. This is just back to normal, which is okay. Nothing groundbreaking, nothing scary and nothing like, Ooh, Ooh, what if the customer is being more cost conscious? Well, that's normal. That's not unusual. Uh, they tend to see really, really strong sales during these big promotional periods. And then when these promotional periods end, you know, for some, for some other retailers, you tend to see, you know, sales kind of soften during those non-promotional periods. Um, so it goes to show you that consumers are still deal hungry. Um, and I think that's one of the reasons why, you know, this, this year we're having, you know, prime day become, um, become four days instead of two days. And I mean, for Amazon's, you know, for, for the company's fundamentals, prime day is a, is a, is a good day for sales, but it's typically not a good day for margins because it tends to be a lower margin business, uh, lower margin days for, for Amazon. So in terms of the company's fundamentals, it's, it doesn't have a material effect on the company's business, but you know, in terms of, you know, getting people in the, the indirect impacts are probably stronger. You know, the fact that more people can sign up for prime memberships during this, during these four days, the fact that, you know, more sellers advertise on Amazon platform, uh, more, more sellers also use Amazon's fulfillment services. Those are the indirect benefits I think from, uh, from prime day. There you go. He came around to the right answer there. I was going to jump in there and, uh, mention all those things as the strategy behind that. Sure you're willing to take a little bit of a margin hit, but the increase in all the other ancillary things that go into Amazon and of course, make up that bottom line profit, generally speaking, more than makeup for, uh, any loss of margin there on prime day. Obviously we'll see how this prime day, prime week, whatever the heck you want to call it pans out over here. The next, you know, next quarter, uh, whenever they give us those results, but nonetheless came around to the right answer there. Hey, uh, everyone, thank you so much for your insight and perspective on Amazon. It's got prime days coming up. Everyone's got a strong buy rating at $248 price target. That's a run Sunderland equity research analysts, CFR research. Okay. So let's go ahead and stop the video right there. Actually not bad. That guy actually was not that far off. Definitely. Um, was talking his book, but wasn't way off target. Now again, he had a price target of two 48, which obviously that's where it ran up to in January. So not a very unreasonable price targeted well for a great company like Amazon to push to personally. It's, I think even at two 48, you could make a case that it was still undervalued at that particular stage, especially when you look back historically at the valuation of Amazon and you're still getting a deal at that stage. And it's just amazing that it's a stock that wall street just hasn't. And really I guess it's what a lot of the big tech and basically they're not out there throwing out AI, this AI, that all the time. So therefore the money is chasing everything else out there in regards to anybody who says the word AI or releases the press release. It says AI, Hey, that's not how Amazon operates in the end. It's not how they run their business. They're kind of that, um, almost sneaky in a sense. They're just back there doing what they do. Hey, you want to disrespect us? Great. You don't. Great. They don't really care one way or another. They're not going to play your games and they're going to continue to move the stock forward. So for me, this is absolutely always on my watch list in terms of buying. I have a ton of it, so I don't need any more. So obviously I want a significant discount, but man, if you're looking to start out a position right now, starting that simple DCA is not a bad way to go. If you're looking to build out a position in Amazon stock. And I don't think there's any of us that believe five years from now, Amazon is not going to be significantly larger with significantly more EPS and more market share. And more importantly, probably be involved in a lot of things that they're working on the background right now that we're not seeing anything hit the bottom line right now, but five years from now we'll be hitting that bottom line. In addition to the fact that, Hey, all their core businesses are all going to continue to grow as well. It's just like almost like, Hey, this one kind of slows down. Well then we got this new thing over here that's popped up. Okay. That one kind of starts slow down. Well, here comes, you know, number three and it's just kind of a rinse and repeat with Amazon. That's why I'm always so bullish on the company there. If you want to see my watch list with price targets for all the stocks I'm looking to buy may have left something special down there for you guys in the pin comment where you get to see that you see on my buy and sell alerts in real time. You get free courses, free coaching, learn exactly how to do evaluation. So you know exactly what you're buying, how to do due diligence. Guys, there's so much involved in the group. Check out the pen comments, see if the membership's right for you and click this video here. If you want to see exactly what I'm buying in this market and click here to see my exact plan for this market. So thanks for watching and we'll see you in the next one.