Growth Stocks to Consider for Long-Term Investment in Today’s Bull Market
The S&P 500 kicked off this year strongly, signaling a bull market that has since propelled all three major indexes higher. Over the year, the S&P 500 gained 24%, the Nasdaq surged 26%, and the Dow Jones Industrial Average rose 14%. Growth stocks have been the standout performers in this bullish climate, traditionally thriving in such conditions.
However, investing in growth stocks shouldn’t be limited to bull markets. Quality growth stocks can deliver results over the long haul—potentially spanning multiple bull phases. It’s essential to identify companies with strong earnings growth prospects that can endure beyond market trends.
Historically, bull markets tend to outlast bear markets, hinting that the current bull market may have further potential for growth. Investing in well-selected growth stocks now could yield benefits both in the short term and for years to come. To illustrate this, here are two growth stocks worth considering for long-term holding.
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1. Amazon
Amazon (NASDAQ: AMZN) stands out as a formidable growth company, dominating both the e-commerce and cloud computing sectors. Recently, Amazon has also started to explore artificial intelligence (AI), a field some believe could transform modern life, much like the invention of the telephone or the internet did. By embracing AI, Amazon enhances its operational efficiency while offering AI solutions to clients via its cloud service, Amazon Web Services (AWS).
This innovative approach has allowed Amazon to maintain a robust earnings history, consistently reporting billions in revenue. Amazon’s competitive advantage in e-commerce stems from its extensive fulfillment network and a subscription model that fosters customer loyalty. Its commitment to faster delivery methods not only cuts costs but heightens customer satisfaction—benefiting both the company and its consumers.
Within cloud computing, AI technology has propelled AWS to an annual revenue run rate of $110 billion, underscoring its role as Amazon’s primary profit engine.
Currently, Amazon is trading at 40 times forward earnings estimates. While not cheap, this valuation appears justifiable given Amazon’s strong positioning in rapidly growing sectors and its continued earnings growth potential.
2. Chewy
Chewy (NYSE: CHWY) focuses on one niche of e-commerce: the pet market. Offering a wide range of products, from pet food to health insurance, Chewy has recently ventured into a physical presence with veterinary clinics named Chewy Vet Care. Additionally, the company earns money through sponsored ads, a growing revenue stream exceeding company expectations.
One feature I find particularly compelling is Chewy’s Autoship program, which demonstrates customer loyalty and provides insight into future revenue. This service enables customers to automate the ordering of regular items, consistently accounting for over 75% of total sales, and exceeding 78% last quarter. Chewy also saw net sales per active customer rise to $565, a 6% increase from previous quarters, highlighting customer satisfaction.
Chewy’s financials are solid; it holds no debt and has $695 million in cash, along with a focus on controlling operating costs. While its gross margin, currently at about 29%, may fluctuate, it is projected to widen as higher-margin segments grow.
Today, Chewy is trading at 25 times forward earnings estimates, making it an intriguing long-term investment option.
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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. Adria Cimino has investments in Amazon. The Motley Fool holds and recommends positions in Amazon and Chewy. The Motley Fool maintains a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily represent the views of Nasdaq, Inc.
