Billionaire Bill Ackman Just Scooped Up Shares of This Unstoppable Stock

Pershing Square, led by Bill Ackman, recently acquired Amazon shares, citing an "extremely attractive" price point around the stock's mid-April low of $167. Ackman believes Amazon's earnings will continue to grow, as the impact of tariffs will be less than expected due to the increasing importance of Amazon Web Services (AWS) to the company's profitability; in Q1, AWS accounted for 63% of Amazon's total operating profits despite representing only 19% of sales, with revenue growth of 17% year-over-year and a 39% operating margin.

Analysis

Pershing Square, led by Bill Ackman, has reportedly acquired a stake in Amazon (AMZN) at what it termed an "extremely attractive" price, likely near the stock's mid-April low of approximately $167 per share, an investment that has since appreciated by around 30%. Ackman's long-term investment thesis is predicated on the view that tariffs will exert a less significant impact on Amazon than the market initially feared, primarily due to the dominant and growing contribution of Amazon Web Services (AWS) to overall profitability. In the first quarter, AWS showcased robust financial health, with year-over-year revenue growth of 17% and an operating margin of 39%; this segment accounted for 63% of Amazon's total operating profits despite representing only 19% of its sales. This performance underscores Amazon's strategic shift towards being a cloud computing powerhouse with an ancillary e-commerce operation, where AWS's sustained growth and high profitability are anticipated to drive margin expansion and earnings per share growth, thereby offsetting potential tariff-related headwinds on its commerce division. The market's sentiment appears to be increasingly reflecting this perspective, with Amazon's stock price recovering to approximately 10% below its all-time high.

Key Decisions for Investors

• Investors should primarily assess Amazon based on the performance and growth trajectory of Amazon Web Services (AWS), as it is the principal driver of the company's profitability and its resilience against potential tariff impacts on the e-commerce segment.
• Despite the significant stock appreciation since mid-April, the long-term outlook for AWS, characterized by strong growth and high margins, may continue to offer a compelling investment rationale for investors with a multi-year investment horizon, aligning with Pershing Square's apparent strategy.
• It is advisable to closely monitor AWS's quarterly revenue growth, operating margins, and its evolving share of total company profits as key indicators to validate the ongoing investment thesis and Amazon's capacity for sustained earnings growth.
• While the article presents a bullish outlook largely focused on AWS, investors should note that some market analysts, such as The Motley Fool Stock Advisor team referenced, have not recently included Amazon in their top buy recommendations, warranting broader due diligence.