Meta Looks More Attractive Than Amazon
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