Investors have long marveled at the resilience of Amazon. Despite its enormous size, it has continued to achieve high levels of growth amid its leadership in e-commerce, cloud computing and, more recently, artificial intelligence (AI).
However, with a market capitalization of over $2.3 trillion, it is likely approaching a point where high percentage growth will be more difficult. Therefore, investors may want to consider other consumer-oriented stocks that can more easily convert market potential into faster growth. The following two stocks have the potential to generate higher returns than the e-commerce and cloud giant.
Admittedly, an energy drink that ranks third in the market is not an obvious place to look for a better-performing stock. However, investors should take a closer look Celsius (NASDAQ: CELH). It stands out for marketing itself as if it used natural ingredients. That approach helped him gain a following among health enthusiasts.
Sales levels also skyrocketed after signing a distribution deal with PepsiCo. That increased its availability, allowing outlets like Amazon and costco sell their energy drinks in large quantities.
Unfortunately, distribution issues caused its stock to drop more than 70% from its peak last year, as a major distributor, likely PepsiCo, sharply reduced its orders.
However, the distributor will likely adjust their order sizes in the future, which will likely make this issue less of a factor. Furthermore, sales of $1 billion in the first three quarters of 2024 managed to grow by 5%. While that is dramatically slower than the 104% annual growth in the first nine months of 2023, it is still an increase.
Additionally, international purchases only accounted for 5% of Celsius’s revenue in the first nine months of 2024. Still, sales grew a combined 38% annually in the Europe and Asia-Pacific regions in the first nine months of the year. . Given the growth potential of these markets, overall sales growth should improve as the company’s non-North American markets claim a larger percentage of sales.
Additionally, the falling share price has pushed its P/E ratio to 41, a level just below multi-year lows. Assuming overall sales increases can at least match its international growth rate over time, Celsius stock will likely overcome recent distribution disruptions and resume its upward march.
Alternatively, if investors prefer to outperform Amazon within their own industries, they may want to turn to the company widely perceived as the “Amazon of China.” Alibaba (NYSE: BABA).
True, fear of another trade war with the U.S. has depressed stocks of China-based companies, despite Alibaba’s lack of exposure to the U.S. In addition, a slowdown in the economy in China weighed on along with nearly $3.8 billion in fines between 2021 and 2023 for regulatory violations. significantly in their actions.
However, given Alibaba’s performance, one wonders whether the sell-off is overblown. The stock is down almost 75% from its all-time high in 2020 and even 10% since its IPO in 2014!
That drop has left it with a P/E ratio of just 17, far less than Amazon, which trades at 48 times earnings amid significant multiple compression. Additionally, with Alibaba’s forward P/E ratio of just 10, investors may not fully appreciate the growth it is likely to experience.
In fact, you could argue that Alibaba has gone cheap for a reason. Its revenue in the first six months of fiscal 2024 was $68 billion, a 5% gain from year-earlier levels. This is a spectacular decline compared to the same period in 2021, when annual revenue growth was 31%.
Still, the nearly $10 billion in net revenue through the first six months of 2024 was up 13% from year-earlier levels. Therefore, even with more moderate levels of growth, Alibaba’s earnings appear to be rising too quickly to justify its very low forward P/E ratio. That factor alone could lead to rapid share price growth if the negative sentiment around Alibaba fades throughout the year.
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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. Will Healy has positions in degrees Celsius. The Motley Fool ranks and recommends Amazon, Celsius, and Costco Wholesale. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
Should You Forget Amazon Stock? Why These Unstoppable Stocks Are Better Buys was originally published by The Motley Fool
