Meta Looks More Attractive Than Amazon

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AMZN: Amazon.com logo
AMZN
Amazon.com

Amazon (NASDAQ:AMZN) had a great run in 2023 with 80%+ return, but holding it doesn’t make sense anymore. Especially when you can find much better stocks like Meta (NASDAQ:META). The difference is so stark that we’d be surprised if the market did not recognize this over the next 12 months. If you are heavily invested in Amazon, here are two stocks that will make you re-think – Meta and Abercrombie & Fitch (NYSE:ANF).

Thoughtfully shifting allocation to more attractive stocks is part of our market outperforming Trefis High Quality Portfolio (HQ) – which beat the S&P 500 in 2023 by >10% despite having limited exposure to the magnificent 7 stocks (no AAPL, TSLA, AMZN, NVDA) as our other bets paid off. Crowdstrike, ServiceNow, Adobe, and Intuit all contributed to HQ outperformance.

Better Buys Than AMZN – ANF & META

SECTOR PEBIT LTM Rev Growth LastQ Rev Growth LTM OpMargin Change
AMZN Consumer Discretionary 38.95 12.50% 12.50% 5.50%
ANF Consumer Discretionary 14.32 20.00% 22.10% 8.80%
META Communication Services 25.64 21.60% 27.30% 13.80%
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For instance, you pay $25.64 per $ of EBIT for META vs $38.95 for AMZN and get higher annual growth (21.6% vs 12.5%), higher quarterly growth (27.3% vs 12.5%), and more margin increase (13.8% vs 5.5%)

Note: PEBIT = market cap / last 12M operating income | LTM = Last 12 Months (last 4 quarters)

Has market rewarded these bets recently?

SECTOR 3M 6M 12M
AMZN Consumer Discretionary -3.80% 4.80% 31.50%
ANF Consumer Discretionary 16.10% 34.00% 286.20%
META Communication Services 14.00% 13.80% 83.00%

There is evidence of market reward as META stock has returned 14.0%, 13.8%, 83.0% in the last 3M, 6M, 12M which is much higher than -3.8%, 4.8%, 31.5% for AMZN

How did these metrics look 1 year ago – Could AMZN’s combination of higher valuation & lower growth persist?

SECTOR PEBIT LTM Rev Growth LastQ Rev Growth LTM OpMargin Change
AMZN Consumer Discretionary 102.62 9.90% 9.40% -1.60%
ANF Consumer Discretionary 12.97 -0.60% 2.90% -3.60%
META Communication Services 28.47 0.90% 11.00% -9.60%

AMZN still had higher valuation of $102.62 vs $28.47 for META but higher annual growth (9.9% vs 0.9%), lower quarterly growth (9.4% vs 11.0%), and more favorable margin change (-1.6% vs -9.6%). The situation looks different now which means that market reward switching from AMZN to META makes sense.

Additional reference metrics

SECTOR PS Market Cap LTM Revenue LTM Opinc LTM Opinc Margin
AMZN Consumer Discretionary 3.12 $1.8 Tril $591 Bil $47 Bil 8.00%
ANF Consumer Discretionary 1.85 $8.2 Bil $4.5 Bil $576 Mil 12.90%
META Communication Services 9.58 $1.4 Tril $143 Bil $53 Bil 37.40%
Note: PS = market cap / last 12M revenue

There is evidence why stocks like META and ANF could be worth consideration over AMZN. In fact, META is currently part of our HQ portfolio strategy which has outperformed the S&P in each of the years – 2021, 2022, and 2023. Here is HQ’s full story