Investors have long marveled on the resilience of Amazon. Despite its massive size, it has continued to return high levels of growth amid its leadership in e-commerce, cloud computing, and, more recently, artificial intelligence (AI).
Nonetheless, with a market cap now of over $2.3 trillion, it is probably going approaching a degree at which high-percentage growth will change into harder. Thus, investors will want to consider other consumer-oriented stocks that may more easily turn market potential into more rapid growth. The next two stocks hold the potential to generate higher returns than the e-commerce and cloud giant.
Admittedly, an energy drink that’s No. 3 available in the market just isn’t an obvious place to search for an outperforming stock. Nonetheless, investors have to take a more in-depth have a look at Celsius (NASDAQ: CELH). It stands out by marketing itself as using natural ingredients. That approach helped it win a following with health enthusiasts.
Sales levels also became supercharged after it signed a distribution take care of PepsiCo. That increased its availability, allowing outlets resembling Amazon and Costco to sell its energy drinks in large quantities.
Unfortunately, distribution issues caused its stock to fall greater than 70% from its high last yr as a serious distributor, likely PepsiCo, drastically reduced its orders.
Nonetheless, the distributor will probably right-size its orders in the longer term, likely making this issue less of an element. Furthermore, sales of $1 billion in the primary three quarters of 2024 managed to grow 5%. While that’s dramatically slower than the 104% yearly growth in the primary nine months of 2023, it still constitutes a rise.
Moreover, international purchases only made up 5% of Celsius’ revenue in the primary nine months of 2024. Still, sales grew by a combined 38% annually within the Europe and Asia-Pacific regions in the primary nine months of the yr. Given the expansion potential of those markets, overall sales growth should improve as the corporate’s non-North American markets claim the next percentage of the sales.
Moreover, the stock price decline has taken its P/E ratio to 41, a level just off multi-year lows. Assuming overall sales increases can at the very least match its international growth rate over time, Celsius stock will probably move on from the recent distribution disruptions and resume its march higher.
Alternatively, if investors prefer to outperform Amazon inside its own industries, they will want to turn to the corporate widely perceived because the “Amazon of China,” Alibaba (NYSE: BABA).
Admittedly, fear of one other trade war with the U.S. has depressed the stocks of China-based firms, despite Alibaba’s lack of exposure to the U.S. Also, a slowing economy in China coupled with almost $3.8 billion in fines between 2021 and 2023 for regulatory violations weighed significantly on its stock.
Nonetheless, given Alibaba’s performance, one has to wonder if the sell-off is overdone. The stock is down by almost 75% from its all-time high in 2020 and is even down 10% from its IPO in 2014!
That decline has left it with a P/E ratio of just 17, far lower than Amazon, which trades at 48 times earnings amid significant multiple compression. Also, with Alibaba’s forward P/E ratio of just 10, investors may not fully appreciate the expansion it’s more likely to experience.
Indeed, one could argue Alibaba has change into low cost for a reason. Its revenue in the primary six months of fiscal 2024 was $68 billion, a gain of 5% from year-ago levels. This can be a dramatic pullback from the identical period in 2021 when yearly revenue growth was 31%.
Still, the nearly $10 billion in net income for the primary six months of 2024 surged 13% higher from year-ago levels. Hence, even with more muted growth levels, Alibaba’s profits seem like rising too fast to justify its rock-bottom forward P/E ratio. That factor alone could spark rapid stock price growth if negative sentiment surrounding Alibaba fades over the course of the yr.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Will Healy has positions in Celsius. The Motley Idiot has positions in and recommends Amazon, Celsius, and Costco Wholesale. The Motley Idiot recommends Alibaba Group. The Motley Idiot has a disclosure policy.