Amazon up 2% as Pershing Square discloses new position

Shares of Amazon.com (AMZN) are up $3.78, or 2%, to $204.90 in afternoon trading after Bill Ackman’s Pershing Square disclosed earlier this morning in a call with analysts and investors that the firm has taken a new position in the e-commerce and cloud services giant. On Pershing’s Q1 investor call, Ryan Israel, Chief Investment Officer at Pershing Square, stated in part: “And then perhaps, you know, most importantly, we add the new position, which is Amazon… I’ll spend a little bit of time talking about what I think is the most substantial move, which is Amazon. Amazon, I think, really is emblematic of a business that Pershing Square thinks is just a fantastic franchise… We think are first rate businesses that we would love to own when we think the price is right and when we think the returns meet the threshold that we’re looking for. And Amazon has been on that list for many years. But what was unique, was our ability because we knew the business very well to quickly move to acquire position in April when the market was in a lot of turmoil. And so to back up on Amazon, what we thought was kind of interesting was Amazon has two businesses. It has a cloud business, called AWS or Amazon Web Services, which which is really leading a lot of the technological revolution… And Amazon is sort of the 800 pound gorilla in that business where there’s only three players. And they have over 40% market share. And we think the future is incredibly bright for that business as less than 20% of all of the IT workloads are actually in the cloud today. We think going forward, maybe as much as 80% or everything but 20% in the future should be in those type of environments. So that part of the business is amazing. There’s also, you know, part of the business, even though that is the web services is 60%, remaining 40% for Amazon is the retail business. That’s the business that we all know and probably use almost on a daily basis today… And one of things that makes Amazon really unique is it has these two disparate businesses which we think individually are very valuable. But they share a very common and core framework, which is Amazon tries to build up massive scale. Use the advantages of that scale, to drive down price and improve the customer experience, and then that begets even more scale as more people wanna do business with them, and they keep reinvesting. So that positive or virtuous cycle of gaining scale, getting a little bit more profit margin, and then reinvesting a lot back in the customer is something that the businesses, and we think has made Amazon very special… And so we’ve been big fans. But we had not yet judged that it would provide us with the returns we were looking for historically because the business is generally traded at a pretty high multiple, which reflected the great future growth outlook. And that really changed earlier this year. Initially, back in February when the company was at an all time high, there were some concerns in the cloud business. That because of DeepSeek in China or potentially some concerns about sustainability of AI, that people would not be investing in the business in the same rate that they would and that the the web services business or AWS might slow a little bit. And then after the announcement of tariffs, in April, the business took a real dive as people were worried about the tariff impact. And as a result, Amazon share price came down more than 30%, and actually was trading when we started buying our shares at about 24 and a half times earnings, which was the lowest multiple that we’ve seen ever since we followed the company in its history. And so we thought this was a uniquely attractive time as we felt that the company be able to work through any slowdown in the AWS business, and we did not judge that tariffs would have a material impact on the earnings. In in the retail business as well. And so we thought Amazon would be well on its way to continuing its plus 20% earnings per share growth.”

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