Amazon vs. Sirius XM: A Tale of Two Investment Paths

Satellite radio leader Sirius XM Holdings (NASDAQ: SIRI) was once a golden ticket for investors, particularly during the dot-com boom. Back then, its stock price climbed high, leaving many hopeful for continued success.

However, the market took a turn when the dot-com bubble burst, resulting in a significant drop for Sirius XM’s share price. For many investors, it ceased to be a wealth-building opportunity. Today, the company offers a high dividend yield and sparks of hope for recovery, especially with Warren Buffett’s recent endorsement of the stock in 2024. While the stock still has some attraction, its reliance on a traditional satellite radio service raises questions. With the prevalence of high-speed internet, wouldn’t it make more sense to focus on online streaming?

Though I admire Buffett’s strategy with Sirius XM and wish success for his followers, I prefer to observe the company’s recovery efforts from a distance.

There are other companies from the dot-com era that continue to thrive, most notably Amazon.com (NASDAQ: AMZN). Unlike many of its peers, Amazon didn’t just manage to survive; it actively shaped two new industries: e-commerce and cloud computing. Let’s explore how this dynamic company has adapted and prospered.

Amazon’s Innovative Business Model Transforms Industries

With a market capitalization of $2.1 trillion, Amazon stands tall among the so-called “Magnificent Seven” of the business world.

In the third quarter, Amazon’s global e-commerce network generated $131 billion in net sales, a significant increase from $120 billion the previous year. Additionally, the Amazon Web Services (AWS) platform reported an impressive operating profit of $10.4 billion. After a brief dip, Amazon’s free cash flows have returned to a robust $43 billion annually.

AMZN Revenue (TTM) data by YCharts

This isn’t a turnaround for Amazon; the company continues to lead and innovate across various sectors. It has established a global computing service that rivals Alphabet’s Google and has revolutionized shipping services, making competitors like FedEx (NYSE: FDX) seem outdated with its same-day delivery options.

Amazon’s Growth and Strong Valuation as Investment Highlights

Amazon is pursuing greater international e-commerce engagement while positioning itself in the ongoing artificial intelligence (AI) revolution. Despite its massive size, the company retains an aggressive, growth-oriented approach. It currently trades at 3.4 times sales and 43 times earnings, reflecting a reasonable valuation for such a successful firm.

For those seeking an investment in AI and a representative in the “Magnificent Seven,” Amazon stands out. It excels in both online retail and cloud services and boasts an award-winning Prime Video service aimed at significant growth. No other company closely parallels Amazon’s unique capabilities across multiple sectors.

Amazon: A Dependable Investment Across Market Cycles

Historically, Amazon has rewarded its early investors and maintains strong long-term growth potential. For investors drawn to Sirius XM due to Buffett’s $2.8 billion stake, Amazon is also appealing, with a $2.0 billion investment from him as well.

Overall, Amazon presents a compelling mix of growth and value, making it hard to ignore. This company is multifaceted, making it a wise investment choice, even by trillion-dollar standards.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, serves on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also a board member. Anders Bylund has positions in Alphabet and Amazon. The Motley Fool has investments in and recommends Alphabet, Amazon, and FedEx. The Motley Fool adheres to a strict disclosure policy.

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