Billionaire Philippe Laffont Sold 72% of Coatue’s Stake in Nvidia and Is Piling Into This Historically Cheap Dual-Industry Leader
2024-09-30 12:06:00
On Wall Street, important data releases are a common occurrence. Monthly inflation and jobs reports, coupled with Wall Street’s leading businesses reporting their quarterly operating results over a six-week stretch every quarter, can make it easy for a key data release to slip under the radar.
Aug. 14 marked what can arguably be described as the most important data dump of the third quarter. This was the last day to for institutional investors and wealthy asset managers to file Form 13F with the Securities and Exchange Commission. A 13F details which stocks Wall Street’s smartest and most-successful money managers purchased and sold in the latest quarter (i.e., the June-ended quarter).
Billionaire Philippe Laffont can’t get enough of this historically inexpensive dual-industry leader
Although Laffont and his team added to 21 existing positions and opened stakes in six others during the June-ended quarter, the purchase that really stands out is the 702,235 shares added to Coatue’s existing position in Amazon (NASDAQ: AMZN). The roughly 10.77 million shares of Amazon held by Coatue equates to more than 7% of invested assets (as of June 30), and is the fund’s second-largest holding by market value, behind only Meta Platforms.
Most investors are familiar with Amazon because it’s the undisputed e-commerce leader. In 2023, it accounted for nearly 38% of domestic online retail market share, which is more than 31 percentage points ahead of Walmart, which occupied the No. 2 spot.
While Amazon’s e-commerce presence is the face of the company and helps to draw more than 3 billion visits each month, online retail sales generate menial margins and minimal operating cash flow. The bulk of what makes Amazon special can be traced to its three ancillary operating segments, none of which is more important than Amazon Web Services (AWS).
According to data from tech analysis firm Canalys, AWS accounted for a 33% share of global spend for cloud infrastructure service platforms in the June-ended quarter. This is well ahead of the 20% market share for Microsoft‘s Azure, which is the No. 2 cloud infrastructure service provider.
Enterprise cloud-service spending is still in its relatively early stages of expansion. To boot, the AI revolution is sparking plenty of interest in generative AI solutions and large language models, which are being incorporated into AWS for clients. AWS consistently accounts for 50% to 100% of Amazon’s operating income on a quarterly basis and is responsible for a sizable percentage of the company’s rapid growth in cash flow.
The other two ancillary segments of importance include advertising services and subscription services. With over 3 billion visitors each month and an expanding content library, Amazon is having no trouble commanding strong ad-pricing power.
Meanwhile, Amazon recently landed an 11-year streaming rights deal with the NBA and WNBA, and is the exclusive streaming partner of the NFL’s Thursday Night Football. Securing popular sports packages will only increase the value of Prime subscriptions.
The final piece of the puzzle that looks to have Laffont favoring Amazon over Nvidia is its historically cheap valuation. Throughout the 2010s, investors paid a median of 30 times cash flow to own shares of Amazon. As of this writing on Sept. 26, shares are valued at less than 13 times cash flow for 2025.
With a valuation that’s more compelling than, arguably, any point in its publicly traded existence, Amazon has the tools and intangibles needed to outpace Nvidia in the return department.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, Nvidia, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Billionaire Philippe Laffont Sold 72% of Coatue’s Stake in Nvidia and Is Piling Into This Historically Cheap Dual-Industry Leader was originally published by The Motley Fool
