Billionaire Bill Ackman Just Scooped Up Shares of This Unstoppable Stock

Billionaire Bill Ackman and his Pershing Square fund have made some moves recently. Although it hasn't been disclosed in a Form 13-F, the fund stated that it scooped up shares of Amazon (NASDAQ: AMZN) at an "extremely attractive" price. Although it didn't give details on what the entry point was, I think it's safe to assume that management essentially bought the bottom of the stock market sell-off in April.

Although Amazon's stock has risen significantly since then, is there still enough value in the stock to warrant purchasing shares now? Let's take a look.

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Amazon's stock has risen around 30% from its lows

Amazon's stock bottomed with the rest of the market at around $167 in mid-April. If we assume that Pershing Square scooped up shares at around that price tag, they're already up around 30% on the investment -- not bad for just two months of holding a stock.

However, Ackman and his company aren't known for flipping stocks. He's a long-term investor who pinpoints undervalued companies and buys them at attractive prices. As a result, I think it's fairly clear that this 30% gain is nice for Pershing Square, but it expects even more performance from Amazon over the long term.

But is that realistic, considering how threatened Amazon is by tariffs?

Tariffs may not have as big an effect on Amazon's stock as one may think

One of Ackman's comments on his Amazon purchase was that he believes earnings will continue to grow because he thinks tariffs will have less effect on consumers than expected. Whether you think that's a valid statement or not, something undeniably factors into this comment: Amazon doesn't get a ton of profits from its commerce division.

Even though Amazon's online store is what most customers interface with almost daily, Amazon Web Services (AWS) is far more vital to the company's profitability than the various items that are made in China and sold on its platform, which may rise in price over the next few months. Cloud computing firms are seeing strong growth thanks to a general migration of on-site workloads to the cloud and AI workloads coming online.

In the first quarter, AWS' revenue growth was 17% year over year, far outpacing its North American commerce sales growth of 8% and international commerce sales growth of 5%. It's also far more profitable, with AWS' Q1 operating margin at 39%. Overall, AWS made up 63% of Amazon's total operating profits in Q1, despite only making up 19% of sales.

Although commerce may have funded the buildout of the AWS business, it's now a cloud computing business with a commerce storefront. With AWS expecting to deliver strong growth over at least the next decade, and with how much it contributes to Amazon's profits, investors should focus on AWS, not commerce. With AWS' profits growing faster than the overall company, it will be able to resist some of the headwinds that tariffs have induced on the commerce side of its business.

That's likely why Ackman believes tariffs won't affect Amazon as much as investors thought in April. With Amazon only about 10% off its all-time high after its rally, the market is starting to come around to that idea as well.

While you can't hop in a time machine and buy shares at the same level as Ackman, I still think there's a compelling argument to buy Amazon's stock here. AWS is a monster that's displaying strong growth and is extremely profitable. Outperformance by this segment will continue to drive margin expansion and deliver strong earnings per share (EPS) growth quarter after quarter that is faster than the market's growth pace (usually around 10%). That makes Amazon a long-term investment story, and it's one that I'd gladly scoop up more shares of today.

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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. Keithen Drury has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.