Investors have long marveled at the resilience of Amazon. Despite its massive size, the company has continued to show high levels of growth thanks to its leadership in e-commerce, cloud computing and, more recently, artificial intelligence (AI).
However, with a market capitalization Now above $2.3 trillion, it is likely approaching a point where high-percentage growth will become more difficult. So, investors may want to consider other consumption-focused stocks that can more easily translate market potential into faster growth. The following two stocks have the potential to generate higher returns than the e-commerce and cloud giant.
Certainly, an energy drink that’s #3 in the market isn’t an obvious place to look for an outperforming stock. However, investors should take a closer look Celsius (NASDAQ:CELH). It stands out by marketing itself as using natural ingredients. This approach has helped it gain traction among health enthusiasts.
Sales levels also increased after signing a distribution agreement with PepsiCo. This increased its availability, allowing outlets such as Amazon and Costco sell its energy drinks in large quantities.
Unfortunately, distribution issues caused its stock to fall more than 70% from its peak last year as a major distributor, likely PepsiCo, significantly reduced orders.
However, the distributor will likely resize its orders in the future, which will likely make this problem less significant. Additionally, billion-dollar sales in the first three quarters of 2024 managed to grow by 5%. Although this figure is considerably slower than the 104% annual growth recorded during the first nine months of 2023, it is nonetheless an increase.
Additionally, international purchases accounted for just 5% of Celsius’ revenue during the first nine months of 2024. Yet sales grew a total of 38% annually in the Europe and Asia-Pacific regions during of the first nine months of the year. Given the growth potential in these markets, overall sales growth is expected to improve as the company’s non-North American markets claim a higher percentage of sales.
Additionally, the stock price decline brought its P/E ratio to 41, just above its multi-year low. Assuming that overall sales increases can at least match its international growth rate over time, Celsius stock will likely move away from the recent distribution disruptions and resume its advance.
Alternatively, if investors prefer to outperform Amazon in its own sectors, they may want to look at the company widely perceived as the “Amazon of China.” Alibaba (NYSE:BABA).
To be sure, fears of a new trade war with the United States have depressed stocks of China-based companies, despite Alibaba’s lack of exposure to the United States. Additionally, China’s slowing economy, coupled with nearly $3.8 billion in fines between 2021 and 2023 for regulatory violations, have taken a toll. significantly on its stock.
However, given Alibaba’s performance, one has to wonder if this sale is not exaggerated. The stock is down nearly 75% from its 2020 all-time high and is even down 10% from its 2014 IPO!
That drop left it with a P/E ratio of just 17, far lower than Amazon, which trades at 48 times earnings amid significant multiple compression. Additionally, with Alibaba’s forward price-to-earnings ratio of only 10, investors may not fully appreciate the growth it is likely to experience.
Indeed, one could argue that Alibaba became cheap for a reason. Its revenue in the first six months of fiscal 2024 was $68 billion, a 5% gain from last year’s levels. This is a dramatic decline from the same period in 2021, when annual revenue growth was 31%.
Still, net profit of nearly $10 billion for the first six months of 2024 jumped 13% from last year’s levels. Therefore, even with more moderate levels of growth, Alibaba’s earnings appear to be growing too quickly to justify its rock-bottom forward price-to-earnings ratio. This factor alone could trigger rapid stock price growth if negative sentiment around Alibaba fades over the course of 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 Celsius. The Motley Fool holds positions and recommends Amazon, Celsius and Costco Wholesale. The Motley Fool recommends Alibaba Group. The Mad Motley has a disclosure policy.
