1 Dirt Cheap Cathie Wood and Warren Buffett Artificial Intelligence (AI) Stock to Buy Hand in Hand in Less than a Year

Ark Invest CEO Cathie Wood is Berkshire Hathaway CEO Warren Buffett is one of the two most visible investors in the financial world. However, the main reasons for over-valuing Wood and Buffett may not be the same.

Wood is an investor in growth stocks, often highlighting the potential of emerging technologies or speculative opportunities that have yet to reach critical mass. In contrast, Buffett focuses on concrete fundamentals such as cash flow, earning power, and sustainable growth over the long term.

Yet despite these differences, Wood and Buffett share a commonality between their brands. As such, all investors have positions in Amazon (NASDAQ: AMZN). Below, I will explain why now it looks like a profitable opportunity to acquire Amazon shares as 2025 approaches.

With 2025 just around the corner, investors are doing the same thing – taking profits from stocks that have gone up and reinvesting those gains into opportunities that are poised to profit again.

In my eyes, Amazon is one of the best artificial intelligence (AI) companies going into next year. Although it is best known for its e-commerce and cloud platform, the company also has a subscription business (Amazon Prime), a streaming service (Prime Video), and an advertising service.

For me, any major source of income for Amazon is it’s set to grow big in the fourth quarter. Over the past few months, businesses have been updating their financial forecasts and budgets for next year as consumers rush to complete their holiday shopping.

When Amazon says it will earn a fourth quarter in early 2025, I wouldn’t be surprised to see a sharp increase in sales from Amazon Web Services (AWS) as organizations slow down on AI strategies, as well as an increase in e-commerce and subscription segments. motivated by year-end buying strategies.

What makes Amazon interesting beyond its diverse ecosystem and multiple revenue streams is its profitability.

Over the past year, Amazon has made a significant contribution to its cashless generation. As a result, the company has been able to strengthen its portfolio — which has a net worth of $87 billion and the like — and reinvest more profits into opportunities in high-growth areas such as AI and streaming.

Two near-term aids that I think are being overlooked are a new series of games featuring YouTube’s biggest star (MrBeast) and ongoing ventures into AI unicorns. Anthropicwhich is becoming a critical pillar and bellwether of AWS.

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Amazon can be a difficult company to value. Since many of its businesses are vulnerable to economic shocks such as inflation or interest rates, Amazon’s growth rate fluctuates dramatically from time to time.

For these reasons, valuation techniques such as earnings-earnings (P/E) or price-to-sales (P/S) ratios may not be the best to use. Instead, I like to test Amazon by reading the price-to-free-cash-flow (P/FCF) ratio.

As the chart above shows, Amazon’s P/FCF of 57 is significantly lower than its 10-year average of 81. I find this discount interesting because Amazon is a much larger and different company today than it was a decade ago. What’s more, the company has a unique opportunity to advance AI in ways that many of its competitors may not even know the size of Amazon’s ecosystem.

To me, Amazon stock is cheap right now and represents a great buying opportunity for long-term investors.

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John Mackey, former CEO of Whole Foods Market, an Amazon company, is a member of the board of directors of The Motley Fool. Adam Spatacco holds positions at Amazon. The Motley Fool owns and endorses Amazon and Berkshire Hathaway. The Motley Fool has disclosure process.

1 Dirt Cheap Cathie Wood and Warren Buffett Artificial Intelligence (AI) Stocks to Buy Before the Year Ends was originally published by The Motley Fool