Dj Return-To-Office Mandates Apply To Everyone, Except A Chosen Few

Investing.com -- Amazon stock staged a strong performance in 2024, outpacing both the Nasdaq and the eCommerce sector with a 44% gain, compared to 25% for the Nasdaq. This surge was supported by an expansion in the price-to-sales ratio, which increased from 2.3x at the beginning of 2024 to 3.1x.

Analysts at Bank of America pointed to Amazon Web Services (AWS) and retail margin growth as two fundamental drivers of Amazon's (NASDAQ:AMZN) success. They anticipate that AI-driven cloud growth will remain a significant opportunity within the sector in 2025.

Moreover, retail margin expansion is expected to continue propelling profit growth that surpasses that of Amazon's peers. The analysts also noted that Amazon is positioned to handle the impact of the US dollar appreciation, which could benefit cloud margins.

Looking ahead to 2025, BofA identified several investment positives for Amazon stock. These include a strong AI-demand cycle for AWS, further retail margin efficiencies, a multi-year productivity cycle driven by robotics, an increase in Prime Video advertising revenue, cost savings from reductions in mid-level management, and a normalization of online retail that meets or exceeds expectations for the fourth quarter and holiday season.

At the same time, the investment bank also outlined potential risks. These are the impact of new tariffs on volumes and margins, investments in new areas like Project Kuiper that could stifle margin progress, and elevated expectations and possible margin pressure for AWS.

Rising competition from Walmart (NYSE:WMT), and a relatively high valuation compared to Amazon's historical price-to-sales and price-to-earnings ratios, were also highlighted. Moreover, with 79 Buy ratings, Amazon appears to be a consensus favorite stock, which may present its own set of challenges.

Regarding tariffs, media reports indicate that no new tariffs would be signed on President Trump's first day in office. Instead, the administration plans to issue a broad trade memo to study potential overhauls with China, Mexico, and Canada.

In light of these positives and negatives, BofA slightly lowered its 2025 estimates for Amazon due to the recent US dollar appreciation, reducing the International Revenue forecast by approximately $7 billion. This adjustment is partially offset by slightly higher AWS margins.

For 2025, BofA estimates revenue/profit/GAAP EPS at $700 billion/$79.5 billion/$6.10, slightly down from the previous $707 billion/$79.9 billion/$6.13. Even with these adjustments, BofA still expects Amazon to show more stable year-over-year revenue growth in the first half of 2025 and better margin expansion relative to large-cap peers.

The firm continues to “see Amazon as a relatively strong play on AI,” analysts led by Justin Post said in a note.

Investing.com -- Analysts at Wolfe Research have identified ten key questions for the power sector as it navigates 2025. 

These questions touch on market performance, regulatory changes, mergers, and other factors likely to influence utilities and independent power producers (IPPs).

The first question examines whether the power sector can sustain its recent run of outperformance. 

Over 2023 and 2024, stocks such as Vistra, Constellation Energy (NASDAQ:CEG), and Talen Energy saw massive gains. 

Analysts are monitoring whether this momentum will persist or taper off, as investor enthusiasm has shown signs of slowing.

Next (LON:NXT), Wolfe Research considers the potential for mergers and acquisitions or new initial public offerings. 

With Constellation's $29 billion acquisition of Calpine sparking activity, questions linger about whether private portfolios like Lightning Power or Alpha Gen might go public or if they will instead merge with existing players.

Data center expansion remains a pressing issue. Companies such as Vistra, NRG Energy (NYSE:NRG), PSEG, and Constellation are expected to announce projects to maintain investor confidence. 

However, competition among independent and regulated markets could create challenges.

A key risk for the sector lies in the hyperscale spending by companies like NVIDIA (NASDAQ:NVDA) and major tech firms like Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN). 

Wolfe Research warns that any slowdown in AI-related data center growth could disrupt projections, particularly for IPPs reliant on those deals.

The regulatory landscape presents additional uncertainties. The Federal Energy Regulatory Commission has yet to establish a clear policy on co-located generation, an issue that has pitted Constellation against Exelon (NASDAQ:EXC). 

The resolution of this debate will determine how quickly projects in regions like PJM can move forward.

Analysts are also tracking the potential effects of the political landscape, particularly the influence of a new administration. 

Key issues include whether the Biden administration's greenhouse gas rules for power plants will be rolled back and whether there will be new subsidies for natural gas under former President Trump.

Capacity auction pricing in PJM markets is another area of focus. Pricing for 2025/2026 reached an all-time high of $270 per megawatt-day, raising questions about sustainability amid rising demand and rule changes. 

Tight market conditions also loom large for regional grids like ERCOT, PJM, and MISO, where reliability risks could drive energy prices higher.

Building new buildings and deciding what to do with existing assets are structural questions facing the sector. 

Key trends include delayed retirements, coal-to-gas conversions, and regulated utilities potentially owning generation. 

Among the recent developments are those in Pennsylvania and Ohio, as well as those under the Texas Energy Fund.

Investing.com -- In a recent report, Bank of America revealed the top 10 stocks most widely held by funds globally, highlighting their dominance in investment portfolios.

The list is led by Taiwan Semiconductor Manufacturing Company (TSMC), held by 95% of the relevant funds. Microsoft (NASDAQ:MSFT) and Arm Holdings ADR (NASDAQ:ARM) share the second spot, with 88% of funds holding these stocks.

Samsung Electronics (KS:005930) follows with 83%, while India’s HDFC Bank Limited (NYSE:HDB) and China’s Tencent Holdings Ltd (HK:0700) each appear in 79% of portfolios.

Rounding out the list are Amazon (NASDAQ:AMZN), NVIDIA (NASDAQ:NVDA), and ASML (AS:ASML), each held by 77% of funds, and Japan’s Keyence (TYO:6861) with a 76% holding rate.

The list demonstrates that the technology sector continues to dominate global investment portfolios.

In 2024, long-only funds significantly increased active exposure to equities, adding $40 billion relative to benchmarks. However, fund managers faced headwinds, as overweight positions underperformed underweights in most regions except the US, where overweights outperformed marginally by 0.2%.

Sector-wise, US Industrials saw the biggest increase in active equity exposure, BofA notes, citing its analysis of 8,400 long-only funds.

US funds also added exposure to Financials “but struggled to increase active exposure to the largest Tech stocks given the substantial index weights of these stocks,” the bank’s strategists led by Nigel Tupper said in the note.

Conversely, in Asia and Emerging Markets, funds reduced their active exposure to Financials while raising their allocations to Tech.

Looking ahead into 2025, BofA's Triple Momentum analysis indicates a favorable outlook for both Financials and Tech, suggesting these sectors may present compelling opportunities for increased active exposure.

In a separate January Fund Manager Survey (FMS), BofA highlighted strong investor sentiment toward the US dollar and equities, while signaling bearish views on most other asset classes.

The survey indicates that cash allocations have fallen to 3.9%, their lowest point since June 2021. This reduction triggered a second consecutive "sell" signal under BofA's Cash Rule, a pattern historically linked to weaker equity performance in the months that follow.

A net 41% of fund managers report being overweight equities, though this represents a decline from the three-year peak of 49% recorded in December.

BofA points to a “big January equity rotation from US stocks to Europe,” as exposure to US equities dropped sharply from a net 36% overweight to 19%. At the same time, Eurozone stocks shifted from a net 22% underweight to a 1% overweight, representing the largest monthly increase in Eurozone exposure in 25 years.

The survey also reveals bearish sentiment across other asset classes. Commodities are underweighted by 6% of managers, while 11% are underweight cash, and 20% are underweight bonds.