Meet Billionaire Bill Ackman's "Magnificent" New Addition to Pershing Square's $13.7 Billion Investment Portfolio

Activist investor Bill Ackman's Pershing Square Capital Management disclosed a new nearly $1.3 billion stake in Amazon (AMZN) acquired during Q2, making it his fourth-largest holding. The investment, initiated in April, reflects a strong conviction in Amazon's resilience and the significant growth potential of its high-margin ancillary businesses, including AWS, advertising, and subscriptions. These operations are projected to more than double Amazon's operating cash flow from $11.04 per share in 2024 to an estimated $24.32 per share by 2027, with the stock currently valued at 9.4 times its 2027 estimated cash flow, notably below its historical valuation multiples.

Analysis

The disclosure from Pershing Square Capital Management's latest 13F filing reveals a significant new high-conviction bet by activist investor Bill Ackman on Amazon (AMZN). The acquisition of a position valued at nearly $1.3 billion makes Amazon the fund's fourth-largest holding, signaling a strong belief in the company's fundamental value proposition beyond near-term market sentiment. The investment thesis appears to be anchored in the powerful growth and margin profile of Amazon's ancillary businesses, which are seen as the primary drivers of future cash flow. While its dominant e-commerce platform provides a vast customer base, the core value is increasingly derived from Amazon Web Services (AWS), advertising, and subscriptions. AWS commands a 32% share of the cloud infrastructure market and is on a run-rate to exceed $123 billion in annual revenue with a 17-19% growth rate. This, combined with advertising revenue growth of 18-24% and expanding subscription services, is projected to more than double the company's operating cash flow per share from an estimated $11.04 in 2024 to $24.32 by 2027. This projected growth makes the current valuation, at 9.4 times estimated 2027 cash flow, appear compellingly low when compared to its historical trading range of 23 to 37 times year-end cash flow.

Key Decisions for Investors

• The establishment of a nearly $1.3 billion stake by a prominent activist investor like Bill Ackman provides a strong bullish signal, reinforcing a long-term value thesis based on future cash flow generation rather than just e-commerce growth.
• Investors should focus their valuation analysis on the growth of high-margin segments like AWS and advertising, using the price-to-operating-cash-flow metric as a key indicator, particularly against the 2027 consensus estimate of $24.32 per share.
• Considering the stock has already gained approximately 34% since Ackman's likely entry point in April, investors should assess if the positive outlook on ancillary services is sufficiently priced in or if the valuation disconnect from historical multiples still presents an opportunity.