Retail is one of the best markets for long-term investment, known for its consistent growth. The industry ranges from grocery to e-commerce, consumer tech, and much more, allowing stockholders to benefit from the tailwinds of dozens of sugments. In fact, the global retail market hit a valuation of $27 trillion in 2022 and is projected to rise to $30 trillion this year.
Costco (COST -0.14%) has enjoyed immense success in the industry, with its shares up 248% since 2019. The company’s wholesale business model has won over consumers in more than a dozen countries and has an exciting outlook as it continues to expand.
However, it’s hard to consider Costco’s stock when Amazon (AMZN -1.21%) also exists. The company is the world’s second-biggest retailer (only after Walmart) and is the No. 1 name in e-commerce. Additionally, Amazon’s diverse business model has seen it gain a powerful position in tech, with a leading 31% market share in the $626 billion cloud market.
This chart shows Amazon’s stock significantly outperforming Costco’s over the last year. Meanwhile, various growth catalysts in retail and tech will likely keep the company on its current trajectory.
So forget Costco. This growth stock could be poised for a bull run.
Amazon has proven resilient when faced with macroeconomic headwinds
An economic downturn in 2022 caused a market-wide sell-off that saw the Nasdaq Composite plunge 33% during the year. Retail companies were hit particularly hard as inflation spikes forced consumers to cut discretionary spending. As a result, shares in Amazon fell 50% in 2022 alongside steep profit declines in its e-commerce segments.
However, the company has made an impressive recovery since then, proving its reliability and resilience. In fiscal 2023, Amazon’s revenue rose 12% year over year to $575 billion, while operating income tripled to $37 billion.
A range of cost-cutting measures and easing inflation bolstered the company’s e-commerce business and has seen its free cash flow skyrocket 904% to $32 billion in the last 12 months.
Amazon’s performance over the last year highlights the importance of investing with a long-term mindset. Investors who sold the company’s stock in 2022 will not have benefited from its significant growth since then.
The retail giant has shown it can successfully navigate macroeconomic headwinds, making its shares an attractive long-term buy. Meanwhile, its considerable cash reserves indicate it has the financial resources to continue expanding and investing in high-growth industries like artificial intelligence (AI).
Earnings per share estimates indicate a massive upside for Amazon’s stock
In dozens of countries, Amazon dominates e-commerce, a market expected to hit $3.6 trillion in 2024 and expand at a compound annual growth rate (CAGR) of 10% through 2028. The tech firm will likely continue profiting from the sector’s tailwinds for years.
However, Amazon’s biggest growth catalyst is easily its cloud platform, Amazon Web Services (AWS). In Q4 2024, revenue from the platform rose 13% year over year to $24 billion. Meanwhile, AWS was responsible for 54% of the company’s operating income, despite earning the lowest portion of revenue between its three segments.
Moreover, AWS gives Amazon a lucrative role in AI, a market projected to expand at a CAGR of 37% through 2030. As the world’s biggest cloud service, AWS has the potential to leverage its massive cloud data centers and steer the generative AI market.
Amazon has entered the market by adding a range of AI tools to AWS and unveiling a new AI shopping assistant called Rufus on its retail site.
The tech giant is on an exciting growth path, and earnings per share (EPS) estimates reflect its significant potential.
This table shows Amazon’s EPS could hit nearly $7 per share over the next two fiscal years. When multiplying that figure by the company’s forward price-to-earnings ratio of 42, you achieve a stock price of $294. Considering its current position, these projections would see Amazon’s share price rise 69% by fiscal 2026.
Combined with a reliable business model and solid positions in e-commerce and AI, Amazon is a better option than Costco and could be poised for a bull run.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.