Magnificent 7 Hit Rock Bottom, But Amazon's $46 Billion “Secret” Makes It a Steal

If your portfolio is all tech, you might want to avoid looking at your phone today. 

And if you wish you could go back in time, you’re in luck because the market just had its worst day since 2022. 

The S&P 500 dropped 2.31% to settle at 5,427.13, and the Nasdaq slid 3.64%, closing at 17,342.41. Meanwhile, the Dow Jones Industrial Average fell 1.25%, or 504.22 points, finishing at 39,853.87.

Before we start walking through the carnage, check out today’s heatmap. (I hope your favorite color is red.)

Magnificent 7 Hit Rock Bottom, But Amazon's $46 Billion “Secret” Makes It a Steal

Ok, I won’t sugarcoat it. The Magnificent Seven—tech's superheroes—had a rough day. Tesla (TSLA) and Alphabet (GOOGL) reported earnings that were as flat as a pancake. Tesla missed its earnings estimates, showing a 45% profit drop due to high AI costs and lower vehicle sales prices, leading to a 10% plunge in its shares. Alphabet, despite beating earnings estimates, scared investors with its $13.2 billion AI spending spree, causing a 5% drop in its stock.

But in the midst of this chaos, I want to talk today about why Amazon (AMZN) is looking like a pretty good bet. Yes, even though Bezos is off doing billionaire stuff and selling off his shares whenever he gets the chance. We’ve all watched it grow like our own child. The Washington-based e-commerce behemoth, with a market cap of $1.9 trillion, has morphed into a global tech powerhouse. They’re not just selling stuff to our wives anymore. Amazon has branched out into entertainment with Prime Video, Amazon Music, Prime Gaming, and Twitch. And let’s not forget their cloud computing giant, Amazon Web Services (AWS).

(Source: Yahoo Finance)

Despite the recent market downturn, Amazon’s stock has been a trooper, rallying 40% over the past year and up 20% year-to-date. At 38.96 times forward earnings, the stock trades at a discount compared to its five-year average, making it a tempting buy-the-dip opportunity. While that alone is enticing, what gets me even more excited is one of Amazon’s secret weapons that doesn’t get nearly enough attention: Twitch.

Back in 2014, Amazon snapped up Twitch for $970 million, a move that seemed bold at the time but now looks downright genius. Fast forward to 2024, and Twitch is raking in about $3 billion a year.

Twitch isn’t just for gamers anymore. It’s a buzzing community of creators and influencers, making it a goldmine for advertising. With millions of live viewers, Twitch offers a unique niche that’s more than just gaming. It’s an advertising hotspot, pulling in younger audiences and redefining online engagement.

(Source: Game Rant)

I’m not the only one banging the drum about Amazon’s potential. Needham analyst Laura Martin sees Twitch as Amazon’s $46 billion “hidden gem” and thinks it could become a powerhouse all on its own. Martin points out that Twitch’s dominance in live-streaming makes it super valuable, even beyond the money it directly brings in. Its young, mostly male audience boosts Amazon’s entire ecosystem, attracting brands that usually wouldn’t touch Amazon with a ten-foot pole. Plus, Twitch’s influence spills over to Prime Video and Amazon Music, creating a synergy that makes Amazon even more profitable.

Martin’s insight led her to bump Amazon’s target price from $205 to $210, suggesting a 12.6% upside. She’s giving it a solid “Buy” rating, clearly confident that Twitch is about to blow up like the annoying “hawk tuah” girl on instagram.

But Martin isn’t the only one excited about Amazon. Analysts are practically head-over-heels for it, with 42 out of 45 giving it a “Strong Buy.” The average price target is $226.77, suggesting a solid 21.6% upside. And get this—some optimistic folks are even betting it could hit $250. That would be a massive 34.1% rally.

So, while every other stock in the Magnificent 7 is shedding billions in market cap faster than you can hit refresh and burning cash on the latest AI craze, let Amazon be your beacon of hope in this wild tech storm. Seriously, Amazon is like that one friend who somehow manages to keep it all together while everyone else is losing their minds.

Stock.News has positions in Amazon, Tesla, and Google.