Investors have long marveled at resilience Amazon. Despite its massive size, it has continued to experience high levels of growth amid its leadership in e-commerce, cloud computing and, more recently, artificial intelligence (AI).
Nevertheless, with market capitalization now at over $2.3 trillion, it is probably approaching the point where high percentage growth will become more difficult. Therefore, investors may want to consider other consumer-focused 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, the No. 3 energy drink in the market is not an obvious place to look for an outperforming stock. However, investors should take a closer look Celsius (NASDAQ: CELH). It stands out through marketing itself because it uses natural ingredients. This approach has helped him gain a following of health enthusiasts.
Sales levels also increased following the signing of a distribution agreement with PepsiCo. This increased its availability, allowing outlets such as Amazon and Costco to sell their energy drinks in large quantities.
Unfortunately, distribution issues have caused the stock to drop more than 70% from last year’s high as a major distributor, likely PepsiCo, drastically reduced its orders.
However, the distributor will likely adjust the size of its orders in the future, making this issue likely to be less of a factor. Moreover, sales of $1 billion in the first three quarters of 2024 managed to grow by 5%. While that’s dramatically slower than the 104% annual growth in the first nine months of 2023, it’s still an increase.
Additionally, international purchases accounted for just 5% of Celsius’ revenue in the first nine months of 2024. Still, sales grew by a combined 38% year over year in the Europe and Asia Pacific regions in the first nine months of this year. Given the growth potential of these markets, overall sales growth should improve as markets outside of North America demand a higher percentage of sales.
Furthermore, the decline in the share price pushed the P/E ratio to 41, a level that is slightly below multi-year lows. Assuming that overall sales growth can at least match the international growth rate over time, Celsius stock is likely to bounce back from recent distribution disruptions and continue its slide.
Alternatively, if investors prefer to outperform Amazon within its own industries, they may want to look to the company many consider the “Amazon of China.” Alibaba (NYSE: BABA).
However, fears of another trade war with the US have weighed on shares of China-based companies, despite Alibaba’s lack of exposure to the US. Also, China’s economic slowdown coupled with nearly $3.8 billion in fines between 2021 and 2023 for regulatory violations weighed heavily on its shares.
However, given Alibaba’s performance, one has to wonder if the selloff is overdone. The stock is down nearly 75% from its 2020 all-time high and is even down 10% since its 2014 IPO!
That decline 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. Also, with Alibaba’s forward P/E ratio of just 10, investors may not fully appreciate the growth it is likely to experience.
Indeed, one could say that Alibaba has become cheap for a reason. Its revenue in the first six months of fiscal 2024 was $68 billion, up 5% from a year ago. This is a dramatic retreat 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 was up 13% from a year ago. Thus, even with subdued growth levels, Alibaba’s profits appear to be growing too quickly to justify its rock-bottom P/E ratio. That factor alone could fuel a rapid rally in stock prices if negative sentiment around Alibaba fades over the course of the year.
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Right now we are issuing “Double Dip” alerts for three amazing companies and there may not be another opportunity like this anytime soon.
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 has positions in and recommends Amazon, Celsius, and Costco Wholesale. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
