AMZN Buy Alert: Why Amazon Stock Is a Bargain Hiding Right Under Our Eyes

The evaluation of Amazon (NASDAQ:Amazon) shares are quite attractive as several large investors purchased significant amounts of the company’s stock last quarter. In addition, the conglomerate recently made a major hiring decision that could improve its financial results in the long term. With the company’s healthcare business growing rapidly, the company delivered very strong results in the first quarter. Amazon is a cheap stock to buy.

Valuation and purchases by major investors

Amazon stock is currently changing hands for 15 times analysts’ 2024 average operating cash flow per share of $11.65. That’s a fairly low valuation for the stock, both objectively and historically. On average, Amazon had an operating cash flow price ratio of 24.7 between 2004 and 2016. As the company begins to capitalize on tremendous opportunities in artificial intelligence and prescription drugs while significantly reducing its costs, the stock’s low valuation at this point is completely unjustified.

A number of large investors seem to realize that the shares are quite cheap. Multi-billionaire Dan Loeb bought 900,000 Amazon shares last quarter, while the well-known hedge fund Whale Rock, increased its position in the security by 1.8 million shares and JPMorgan Chase & Co. (NYSE:JPM) increased its position by 7.58 million shares. Finally, another renowned hedge fund, Tiger Global Managementincreased its stake in Amazon by 1.44 million shares in the first quarter.

An important personnel decision and excellent results in the first quarter

In May, Amazon announced that Adam Selipsky would step down as head of the company’s cloud infrastructure unit, AWS. Under Selipsky, AWS has continued to grow rapidly. The unit’s revenue rose 17% in the first quarter compared to the same period last year, while operating income nearly doubled year over year to $9.4 billion, from $5.1 billion.

However, in the fourth quarter of 2023, AWS lost two percentage points of market share, while its share remained stable in the last quarter. If the company’s new CEO, Matt Garman, can find ways to increase its market share, Amazon stock would see a major boost in the future. Since Garman was previously AWS SVP of sales, marketing, and global services, he likely has ideas on how to significantly improve the company’s performance.

Also importantly, as I mentioned in a previous column about Amazon, the company reported excellent first-quarter results, as its profit rose to $10.4 billion, compared to just $3.2 billion in the same period last year. And its operating cash flow for 2023 was a massive $84.9 billion.

Amazon’s healthcare business is gaining momentum

There are several signs that healthcare could become a big, disruptive business for Amazon. The conglomerate announced earlier this year that it had signed a deal with Eli Lilly (NYSE:LLY) to deliver pharmaceutical giant Zepbound’s weight-loss drug. John Love, vice president of Amazon Pharmacy, said the deal with Eli Lilly and similar agreements with its competitors would bring the tech giant “a lot of revenue.” In addition, Amazon announced in March that it would expand its same-day drug delivery business “to more than a dozen U.S. cities by the end of 2024,” quartz reported. CEO Andy Jassy said in April that the company had already launched the service in eight cities. Finally, the company opened its first physical drug delivery location in California on May 29.

What’s more, as I reported in my previous column, Jassy said, “Our healthcare business is growing strongly because customers love the customer experience in our pharmacies.”

The conclusion on Amazon shares

The stock’s valuation is very attractive and many large investors bought significant amounts of the shares in the first quarter, which bodes well for the company’s future. Meanwhile, the company’s new AWS boss could well bring positive changes and it seems as if the company is making great progress in the healthcare sector. Given all of these points, I consider Amazon stock to be a strong buy at this point.

At the time of publication, Larry Ramer held a long position in AMZN. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publishing policies..