Billionaire investor Dan Loeb says there's an epic $1 trillion opportunity in Amazon that the market is failing to see
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Billionaire investor Dan Loeb said he sees $1 trillion in untapped value in Amazon, the WSJ reported Wednesday.
He believes AWS' enterprise value could top $1.5 trillion and its retail business could reach $1 trillion, it said.
The activist investor's Third Point hedge fund boosted its stake in Amazon to nearly $784 million in recent months.
Hedge fund boss Dan Loeb told investors he sees about $1 trillion in untapped value in e-commerce giant Amazon, the Wall Street Journal has reported.
The market is failing to grasp the immense potential value from two of Amazon's businesses, Loeb said on a private call with investors in his Third Point hedge fund, the WSJ reported Wednesday, citing sources.
The opportunities lie in Amazon's cloud-computing unit — Amazon Web Services, or AWS — and its core e-commerce segment, the billionaire investor said, according to the report.
One of the slides on the call put the enterprise value of AWS at more than $1.5 trillion, about in line with Amazon's current market capitalization of $1.6 trillion. Enterprise value is a calculation of a business' market worth that takes into account things like its debt and its cash reserves.
Meanwhile, the potential worth of Amazon's retail business was pegged at $1 trillion, the WSJ said.
At the end of 2021, Amazon represented a 5.47% stake worth $783.5 million in Third Point's book, a securities filing from Monday showed.
Before that, at the end of the third quarter, the hedge fund held a stake worth roughly $608 million in the e-commerce giant. That means Third Point substantially added to its position.
Loeb — a well-known activist shareholder who famously urged Disney to permanently suspend its dividend and redirect the funds to its streaming service — doesn't seem to be pursuing a campaign at Amazon, the WSJ noted.
And in a Third Point investor letter dated Wednesday, he said he had long admired the tech giant, as he commented on the fund's position in it.
"After lagging tech peers for most of last year, we significantly increased the size of our investment, reflecting our conviction that Amazon is at an important crossroads as new management considers its long-term strategic plan to move the company forward, which may include several bold initiatives that are the subject of wide market speculation at the proverbial investor water cooler," he wrote in the letter.
Former AWS CEO Andy Jassy took over from Jeff Bezos as Amazon's chief in July, after the cloud unit grew into a $40 billion business. While AWS contributes less than 13% of Amazon's revenue, it's seen as something of a cash cow for the company.
Loeb said he saw two things as a good sign: Amazon's board bought back shares in January, for the first time in a decade; and the additional disclosures it made in its revenue and expenses by category.
"Amazon is a large and complex company, and greater financial disclosure will no doubt help investors better understand the various parts of the business and significant sum-of-the-parts value," he said in the letter.
The Third Point founder praised Amazon at the height of the pandemic, especially the part played by its cloud services in remote working.
Amazon's stock rose 76% in 2020, as people turned to online shopping during lockdowns. But it gained just 2.4% in 2021, and it is down 5.1% so far this year. It was last trading around $3,162 per share on Thursday.
Third Point said its flagship offshore fund was down 5.3% in the fourth quarter, bringing its year-to-date returns to 22.7%.
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