Strong Long-term Prospects: Here Are Three Consumer Stocks to Consider

After a stock has surged, many investors hesitate to purchase, fearing a downturn. However, short-term momentum doesn’t always signify a stock has peaked. Several reputable companies experience considerable growth that may continue even after momentum slows.

Presently, notable performers in the consumer goods sector show great long-term potential. Among them are Carnival (NYSE: CCL) (NYSE: CUK), Amazon (NASDAQ: AMZN), and Costco (NASDAQ: COST). Their respective stock prices have risen by 21%, 31%, and 34% in the past year. Let’s delve into why these stocks are worth buying now.

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1. Carnival: A Comeback Story

The onset of the pandemic significantly impacted Carnival, the world’s largest cruise operator, as operations halted and debt soared. This forced the company to report losses and a declining stock price.

Recently, however, Carnival has shown impressive recovery. The company implemented various strategies, such as reducing fuel costs and enhancing onboard spending, while managing to reduce debt, particularly focusing on variable-rate borrowings.

These efforts yielded positive results, with Carnival revealing record revenue and operating income in its last quarter. Additionally, advanced bookings for future cruises surpassed last year’s highs at elevated prices, reflecting strong demand.

Despite appreciating over 20% this year, Carnival’s stock still appears attractive at 20 times its trailing 12-month earnings—a significant decrease from over 40 times prior to the pandemic.

2. Amazon: Leading in E-commerce and AI

Amazon thrives in two high-growth sectors: e-commerce and cloud computing. Recently, the company has also become a player in artificial intelligence (AI). Its e-commerce operations are enhanced by AI-driven efficiencies and improved customer service, which may lower costs and boost customer retention.

Amazon Web Services (AWS) is another avenue where AI plays a crucial role. It supplies AI products and services to businesses, aiding in their AI development efforts. AWS offers a range of tools, including budget-friendly options and high-end products like Nvidia’s graphics processing units (GPUs).

AWS has also shown strong performance, with an annual revenue run rate of $110 billion in the latest quarter. Historical performance indicates Amazon has consistently achieved substantial revenue and profit growth, making the stock reasonably priced at 38 times the estimated forward earnings.

3. Costco: A Membership-driven Business Model

Contrary to common belief, Costco generates a significant portion of its profits not just from selling groceries and general merchandise but primarily through membership fees. These fees are high-margin and cost-effective for the company, fostering a loyal customer base.

This model allows Costco to offer low prices on products, thus enhancing customer loyalty and attracting new members. The figures speak for themselves: Costco boasts a renewal rate exceeding 90%.

Costco’s affordability positions it well even during economic downturns, as consumers seek value. The company has also rewarded investors with special dividends five times, including the highest ever at $15 per share last year.

While Costco’s shares trade at 49 times its forward earnings estimates, the company’s strong business model and dedicated membership base justify its valuation.

Should You Invest $1,000 in Carnival Corp. Right Now?

Before purchasing stock in Carnival Corp., it’s essential to note:

The Motley Fool Stock Advisor team recently identified the 10 best stocks to buy now. Unfortunately, Carnival Corp. is not among them. The stocks on the list showcase potential for impressive returns in the coming years.

Consider this: if you had invested $1,000 in Nvidia when it made the list on April 15, 2005, your investment would now be worth $857,383!*

Stock Advisor provides a straightforward roadmap for investors, featuring portfolio-building advice, regular analyst updates, and two new stock recommendations each month. Since its inception, the Stock Advisor service has significantly outperformed the S&P 500.

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*Stock Advisor returns as of November 4, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Nvidia. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.