2024-08-06 09:15:01
Amazon‘s (NASDAQ: AMZN) investment in electric vehicle (EV) maker Rivian Automotive (NASDAQ: RIVN) gets a fair amount of coverage in the financial press, but many investors are probably not aware that the e-commerce giant owns stock in nine other publicly traded companies.
On July 30, Amazon disclosed via a filing with the Securities and Exchange Commission (SEC) that it owned shares of 10 public companies as of the end of the second quarter. Its 10-stock portfolio was worth $2.53 billion on June 30.
Given Amazon’s massive size, $2.53 billion is a relatively small number. It’s under 1% of Amazon’s market cap of $1.76 billion. So, changes in the prices of Amazon’s stock holdings are not likely to move the needle much for Amazon’s financial performance or stock price. However, they can make a little difference. In the second quarter, the e-commerce leader recorded “marketable equity securities valuation gains” of $443 million (the bulk of which was from its Rivian stock stake), which was 3.3% of its quarterly net income.
On the other side of the coin, shareholders in the 10 companies in which Amazon owns a stake could profit if Amazon decided to fully acquire one or more of them. However, investors should not invest in a company just because they think it could possibly be a future takeover target.
Do any of Amazon’s stock holdings look like attractive investments?
Amazon’s stock holdings
Stocks are listed in order of their value in Amazon’s portfolio as of the end of the second quarter.
| Company | Business | Market Cap | Number of Shares Amazon Owns / Amazon Percentage Stake as of End of Q2 | Value as of End of Q2 | Stock’s Total Return 1-Year / 10-Year |
|---|---|---|---|---|---|
| Rivian | EV maker | $14.7 billion |
158.4 million / 16.04% |
$2.13 billion | (43.2%) / N/A |
| Air Transport Services Group | Air cargo transportation provider | $970 million |
12.7 million / 19.39% |
$176.7 million | (27%) / 6.5% |
| Twilio | Cloud communications company | $10.1 billion |
1.8 million / 1.10%* |
$100.5 million | 3.1% / 118% |
| Vital Farms (NASDAQ: VITL) | Organic, pasture-raised egg producer | $1.5 billion |
1.5 million / 3.63% |
$71.5 million | 232% / N/A |
| Astera Labs | Semiconductor company | $6.6 billion |
277,777 / 0.14%* |
$16.8 million | N/A / N/A |
| Marvell Technology | Semiconductor company | $51.3 billion |
225,428 / 0.03%* |
$15.8 million | (4.6%) / 509% |
| IonQ | Quantum computing company | $1.5 billion |
1.9 million / 0.09%* |
$13.5 million | (61.4%) / N/A |
| Nautilus Biotechnology | Development-stage biotech company | $303 million |
1.5 million / 1.16% |
$3.4 million | (21.4%) / N/A |
| SmartRent | Real estate tech company | $345 million |
626,893 / 0.30%* |
$1.5 million | (55.9%) / N/A |
| Too small to discuss** | N/A | N/A | N/A | N/A | N/A |
| S&P 500 | N/A | N/A | N/A | N/A | 20.2% / 192% |
Data sources: Amazon’s 13-F SEC filing and Yahoo! Finance. Market cap and stock performance data as of Aug. 2, 2024. *Calculation by author. **Too small to discuss per The Motley Fool guidelines.
Five stocks have traded for three years or less
Half of Amazon’s 10-stock portfolio has traded for three years or less, so these companies and their stocks don’t have significant performance data.
Rivian and Astera Labs went public via initial public offerings (IPOs) in November 2021 and March 2024, respectively. Nautilus Biotechnology, SmartRent, and IonQ went public via reverse mergers with special purpose acquisition companies (SPACs) in 2021 — June, August, and October, respectively.
Vital Farms is a big recent winner
Vital Farms stock has nearly tripled over the last year, but it’s taken investors on a roller-coaster ride. The stock declined after the company’s July 2020 IPO and did not rise above the IPO price of $22 until March 2024. The stock closed at $34.93 on Aug. 2, so it’s gained 59% since the IPO.
Vital Farms is the leading U.S. brand of pasture-raised eggs by retail sales. The company’s robust financial performance (revenue and earnings per share rose 24% and 169%, respectively, in the first quarter) reflects that a sizable portion of consumers are willing to pay a somewhat higher price for eggs that they deem healthier, tastier, and more ethically produced compared to most grocery store offerings.
That said, it’s challenging for the stocks of companies that produce so-called commodity products to perform well over the long term. So, I’m not fond of stocks of companies that produce commodity (or near-commodity) products, but for those folks who feel differently, Vital Farms stock looks worth exploring.
Are any of Amazon’s stocks a buy?
I’d not call any of Amazon’s 10 stock holdings a buy. Most of them are unprofitable and risky. Air Transport Services and Vital Farms are the only two companies that are profitable on the basis of generally accepted accounting principles (GAAP), while Twilio and Marvell are profitable from an adjusted, or non-GAAP, basis.
That said, Rivian is worth watching.
Rivian is worth watching
It’s incredibly difficult for auto start-ups to succeed because the auto business has extremely high fixed costs. But Rivian has a decent shot at beating the odds, just as EV pioneer Tesla did. Its top advantages include its strategic partnerships with Amazon and Volkswagen (VW).
Rivian’s Amazon partnership involves it producing the e-commerce giant’s initial order of 100,000 custom-designed electric delivery vans (EDVs). In late June, Rivian and VW announced their plans to form a 50%-50% joint venture (JV) to “create next-generation electrical architecture and best-in-class software technology.” As part of the deal, Rivian will license existing intellectual property rights to the JV, and VW will invest $5 billion in Rivian, which is a much-needed injection of cash.
In early July, Rivian reaffirmed its 2024 production guidance of 57,000 vehicles. In the first half of the year, the company produced 23,592 vehicles and delivered 27,378 vehicles.
Rivian is scheduled to report its second-quarter results on Tuesday, Aug. 6, after the market close. Wall Street is looking for revenue to increase 1% year over year to $1.13 billion, and adjusted loss per share to widen 12% to $1.21.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Tesla, Twilio, and Volkswagen Ag. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
