We recently published a list of 8 Best Video Conferencing Stocks To Buy According to Analysts. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against other best video conferencing stocks to buy according to analysts.
An Overview of The Video Conferencing Industry
Video conferencing software connects two or more parties virtually through video and audio over an internet connection. During the COVID-19 pandemic when lockdowns shut almost everything, the video conferencing market witnessed a surge in demand. According to a report by Grand View Research, the video conferencing market was valued at around $4.21 billion in 2020 and the valuation rose significantly to around $7 billion in 2022. Moreover, as per the most recent figures. The video conferencing market was valued at $28.61 billion in 2023 and is projected to grow from $33.04 billion in 2024 to $60.17 billion by 2032, indicating a compound annual growth rate of 7.8%.
According to a BBC report published on June 3rd, 2020, during the pandemic, the usage of the video conferencing platform Zoom surged 30 times in April 2020 alone. The report further highlighted that the daily participant usage exceeded 300 million users during peak pandemic times.
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At first, the market growth was driven by the pandemic and lockdowns around the globe, which forced businesses, government organizations, and education institutes to adopt virtual modes of engagement. For instance, in May 2020, the World Health Organization (WHO) held its first-ever virtual assembly. Moreover, educational institutes used videoconferencing software to conduct graduation ceremonies.
Fast forwarding to the post-pandemic era now that the world is back to normal the video conferencing market is driven by the rise in remote jobs and e-learning. According to a report by Pew Research published on March 30, 2023, around 35% of the US workforce was working remotely in 2023. Although this figure was down from 43% recorded in January 2022 and 55% in October 2020, which is the pandemic era, the percentage of remote workers was still up 7% compared to pre-pandemic years.
Looking at the regional insights, North America held the largest market share of around 31% in 2023 as it benefits from the large organizations that are engaged in developing video conferencing software. Moreover, the region is also home to an experienced workforce capable of adopting remote work. In addition to North America, the Asia Pacific region is expected to grow at the fastest CAGR due to the growing interest in digitalization across businesses, governments, and educational institutes.
Looking ahead, the rise and recent developments in artificial intelligence, the Internet of Things, and cloud technologies are expected to further boost the video conferencing market. According to a report by the World Economic Forum, global digital jobs are estimated to grow by around 25% to reach over 95 million indicating the growth prospects for video conferencing software due to its indispensable position for remotely operating organizations.
Our Methodology
To curate the list of 8 best video conferencing stocks to buy according to analysts we used various internet rankings and our previous articles. We compiled a list of video conferencing companies that were most widely held by hedge funds, sourced from Insider Monkey’s Q2 2024 hedge funds database. Next we checked analysts upside potential for each stock from CNN and ranked our stocks in ascending order of their upside potential. Please note that the data was recorded on November 8th 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An adult learner receiving feedback from a tutor via video-conferencing.
Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Analysts Upside Potential: 15.29%
Amazon.com, Inc. (NASDAQ:AMZN) offers a variety of services and products through its Amazon Web Services (AWS) segment. The segment also focuses on video conferencing through its Amazon Chime platform.
Amazon Chime is a unified communications service that facilitates online meetings, video conferencing, calls, and chat. It is designed for both individuals and organizations, allowing users to connect seamlessly from various devices including desktops, mobile phones, and in-room video systems.
Some of the key features of the platform include HD video meetings with up to 100 participants in the Pro version. It also supports screen sharing, meeting chat, and dial-in options for convenience. The platform integrates smoothly with Microsoft Outlook for scheduling meetings and can be accessed through various devices.
Amazon.com, Inc. (NASDAQ:AMZN) released its third-quarter results for fiscal 2024. The company generated net sales of $158.9 billion up 11% year-over-year. Net sales were primarily driven by a strong performance in its AWS segment which includes Amazon Chime. The AWS segment’s sales improved 19% year-over-year to $27.5 billion.
Moreover, operating income for the segment was also impressive as it improved from $7 billion in Q3 2023 to $10.4 billion in Q3 2024. Looking ahead the company is expecting net sales to further improve between 7% and 11% year-over-year in Q4 2024.
Alphyn Capital Management stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:
“Amazon.com, Inc.’s (NASDAQ:AMZN) continued growth is driven by its strong performance in AWS and advertising, which grew 19% and 20%, respectively. E-commerce growth moderated to 9.3%, likely due to softer consumer demand.
In previous letters, I mentioned how Amazon’s heavy investments in logistics and fulfillment suppressed margins for some time, but the company is now reaping the rewards of those earlier expenditures. European operations have been profitable for the second consecutive quarter, while North American operating margins have risen from pandemic lows to 5.3%. A key ongoing area of focus for Amazon has been reducing the “cost to serve”; this is beginning to show tangible benefits. In 2023, Amazon undertook a “regionalization” strategy, which divided the U.S. into eight distinct regions for fulfillment and transportation, with corresponding distribution centers in each. As I learned from an expert interview done by InPractise, “regionalization” has resulted in estimated shipping expenses dropping from $4.76 per unit to $4.50, and they are now approximately $4.26, with potential reductions of 2-3% annually. Interestingly, Amazon leaned on its third-party vendors (3P) to finance much of this strategy. It did so by requiring 3P vendors ship inventory to the multiple regional distribution centers, instead of to a single location as they used to do. Moreover, Amazon imposed penalties for failing to meet strict minimum and maximum quantities. In this way, Amazon used 3P inventory to expand its distribution capacity by around 24 million square feet, much of which it could use for its own 1P inventory. Clever strategy, but one wonders if this raises the risk of an eventual vendor backlash due to the added financial and logistical pressures on 3P sellers.
Like Alphabet, Amazon is investing heavily in its AWS infrastructure to support its growing AI business. In the first half of the year, the company spent $30.5 billion on capital expenditures, with plans to exceed that in the year’s second half. When questioned about this during the earnings call, CEO Andy Jassy emphasized that they are seeing significant demand for AI-related services, which he believes will become a “very large” business for Amazon.”
Overall, AMZN ranks 4th on our list of best video conferencing stocks to buy according to analysts. While we acknowledge the potential of AMZN to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.