Whenever growth investors start looking at possible investments, we’re always looking for the next Amazon (NASDAQ:AMZN) or the next Apple (NASDAQ:AAPL). How can that not be what we’re looking for? These so-called Amazon stocks don’t have to become $2 trillion juggernauts though.
There are only a few juggernauts out there that are lurking and that’s okay. Not every stock has to surpass a massive market capitalization to generate strong returns. Instead, I want to look for companies that are carving out huge roles in growing secular themes. More so, I’m looking for companies that started off doing one thing and are now branching out into other industries and businesses.
For instance, Amazon started off selling used books. But even more recently, it was an e-commerce giant. Then it started getting into advertising, web services, media and other areas.
So, that’s what I’m looking for in some of these smaller companies too. Those that are dominating their original market, but at the same time looking at new growth levers. Not all of these endeavors will succeed and not all of these Amazon stocks will pan out to be massive winners. Or maybe they will, but we won’t know for a while. Let’s get right to it and look at the next wave of massive growth.
- Roku (NASDAQ:ROKU)
- Shopify (NYSE:SHOP)
- Fastly (NYSE:FSLY)
- Jumia (NYSE:JMIA)
- Pinterest (NYSE:PINS)
- Square (NYSE:SQ)
- Salesforce (NYSE:CRM)
Now, let’s dive in and take a closer look at each one.
Amazon Stocks of the Future: Roku (ROKU)
Like I said in the intro, looking for the next Amazon is a tall order. In other words, what can be the next entity that completely dominates its industry, commands tremendous brand power and operates internationally?
That makes me think of Roku.
Like Amazon, Roku has faced — and still faces — plenty of doubt and skepticism from its detractors. “It’s just a stick,” they say. However, it’s anything but. Roku’s platform business generates considerable growth, both from advertising and from streaming fees.
That was evident in the most recent quarter. Despite the clear and obvious trends in streaming video, the company still crushed top- and bottom-line expectations. Revenue of roughly $575 million grew 79% year over year and beat estimates by more than $80 million. A surprise profit of 54 cents per share beat expectations for a loss of 13 cents a share, while guidance came in ahead of forecasts.
How is Wall Street still so conservative? Regardless of the reason, it spells opportunity for patient investors. That’s particularly true as Roku expands into its own content and pushes into international markets.
If any company has the potential to literally be the next Amazon, it’s Shopify. Like Amazon did two decades ago, Shopify is completely disrupting the e-commerce industry.
The company isn’t flying under the radar, though. While its growth rates remain impressive, Shopify currently commands a market cap of $156 billion. It also isn’t cheap, trading at 34 times this year’s revenue and 25 times next year’s estimates.
Who knows though, perhaps current revenue expectations are conservative, even though consensus expectations call for 51% sales growth this year and more than 30% growth next year.
No matter how one slices it though, it’s hard to deny that Shopify isn’t changing things up in a very meaningful, very powerful way. By giving power to the brands — be it a small mom-and-pop company or a behemoth business — Shopify is creating a power shift. They are taking control away from Amazon and giving it back to the companies.
By creating various business units like Shopify Pay, shipping, credit, platform revenue and other growth drivers, it’s creating a can’t-live-without e-commerce ecosystem.
This stock may be expensive, but it’s not going anywhere but up. Of all the stocks, this one most reminds me of the massive potential in the years ago.
Amazon Stocks of the Future: Fastly (FSLY)
Fastly is a bit more controversial for several reasons. First, shares enjoyed an absolutely explosive rally, climbing from the low-teens to more than $120 per share.
However, Fastly couldn’t keep up with expectations and we’ve seen the share price plummet almost 70% from the highs. Part of this is due to the bear market in growth stocks. Part of it’s due to its largest customer moving a bulk of its revenue to another provider (due to the Trump Administration’s pressure on Tik Tok).
These aren’t the only observations that make Fastly somewhat controversial, though.
The company has many doubters as Fastly’s modest growth rates draw doubts from bulls and jeering from the bears. The truth is, for investors who have done their research, Fastly’s management has stated that it should garner momentum in the second half of the year, not the first half. The recent earnings report reiterates that outlook, with just okay quarterly results and guidance for next quarter, but a better-than-expected full-year outlook.
As Fastly aims to disrupt the cloud-computing industry, we are approaching the potential tipping point of a modest risk, massive reward opportunity for investors. If Fastly can nail the top spot of this industry and hold it down, it will enjoy years worth of strong secular growth. Not to mention, it has a growing cybersecurity unit as well.
The company isn’t necessarily aiming to become the “Amazon of Africa,” but that’s what bulls are looking for from Jumia.
There have been a ton of ups and downs with this company and that’s evident by its stock price. Jumia opened for trading near $19 in late 2019 and surged toward $50. The stock then plummeted toward single digits before Covid, dropped to a low of $2.33 during Covid, then soared to new all-time highs near $70 in February 2021.
Not to give a full-blown history lesson, but it’s worth mentioning that we’ve seen a 75% decline from those highs as well.
So where are we now? Africa is a much more disjointed continent than North America or Europe. In those regions, e-commerce has boomed as scale, logistics and convenience have all allowed online sales to flourish. It’s not the same situation in Africa.
While the continent is made up of many countries like Europe, not all of them are as cohesive. Further, Africa can be a bit of a logistical nightmare. There’s less money to go around too, while internet connections are not as strong or dependable.
With that being said, Jumia is looking to build something much bigger — it’s looking to build all of the businesses that will make an a e-commerce marketplace thrive. That includes the logistics and includes focusing on the countries with younger populations and strong internet usage.
With more than 1 billion people on the continent, whatever company figures out the e-commerce puzzle in Africa, it will be sitting on a gold mine. If it’s Jumia, this could easily be the next Amazon.
Amazon Stocks of the Future: Pinterest (PINS)
I can’t believe how little respect Pinterest seems to garner from Wall Street. While its stock price has finally rallied to reflect its strong fundamentals, the recent selloff has me thinking that investors are grouping the stock with its lower-quality growth peers rather than its high-quality social media peers — like Facebook (NASDAQ:FB).
This company has a clear advantage vs. the rest of the social media space: It lacks the hateful, negative environment that seems to thrive on other platforms. Instead, Pinterest acts as a medium for inspiration, allowing online marketers to thrive on its platform. It’s one reason Pinterest has such incredible success with its advertisers and it helps explain why it has such strong growth.
Analysts expect an incredible 53% revenue growth this year to $2.6 billion. Earnings are forecast to explode 124% to 94 cents a share and grow another 40% in 2022 to $1.32 per share.
For perspective, Snap (NYSE:SNAP) did $2.5 billion in sales last year and is forecast to generate $3.9 billion this year. Pinterest is forecast to do $3.5 billion in 2022 (and that could be conservative). Yet Snap commands are market cap of $92 billion vs. Pinterest’s market cap of $40 billion. Pinterest is about a year behind Snap in terms of revenue yes has significantly better margins (gross margins of 74.6% vs. 52.3%).
Based on this, Snap is either highly overvalued or Pinterest is undervalued over the next 12 months. I’m betting it’s the latter.
Like Shopify, Square is hardly considered small and it’s not considered to be flying under the radar. During the Covid-19 selloff, this stock was trading at one heck of a discount.
Despite the incredible rally in the share price, it still reminds me of Amazon. Perhaps not the early days of Amazon were doubt encompassed the stock. But rather, the days where bears embraced that Amazon wasn’t going to disappear, but instead nitpicked things like “limited markets” and an “overvalued stock price.” We saw where that got them.
However, we saw Amazon spread its tentacles into other business units and thrive from doing so. That includes cloud computing, streaming, advertising and media, among others. For Square, the company has similar traits.
It has fully embraced cryptocurrencies, allowing its customers to buy and sell Bitcoin (CCC:BTC-USD) on its Cash App platform. While we’re at it, Cash App has become a strong revenue generator for the company as well. Its legacy business of easy-to-use point-of-service devices continues to generate solid recurring revenue, but it’s other units are growing quickly. That includes business loans, gift cards, payroll services, online checkouts and more.
This company really does continue to innovate and as a result, can continue to generate new revenue streams in the future.
Amazon Stocks of the Future: Salesforce (CRM)
Last but not least, we have Salesforce. Like some of the others on this list, Salesforce isn’t tip-toeing past anyone. Its $210 billion market cap places it among some of the largest companies in the country.
However, as it continues to spread out its business, it’s got that “tentacle” look just like Amazon did several years ago. It wouldn’t be weird to look back a decade from now and see this company sporting a $1 trillion market cap. Plus, it has the growth to back it up. It continues to consistently grow its revenue and income, while its detractors continue to cite the stock’s valuation as a cause for concern. Well, it hasn’t stopped Salesforce in the last 10 years and I don’t expect it to stop the stock from rising over the next 10.
The company continues to deliver consistent growth, with revenue forecast to grow 22% this year and 19% in 2022. Salesforce acquiring Slack (NYSE:WORK) is one example of the company branching out. Its investment in Snowflake (NYSE:SNOW) is another.
It continues to invest in cloud-computing, big data and artificial intelligence, and is becoming a staple in the technology space. Don’t expect that to change any time soon.
On the date of publication, Bret Kenwell held a long position in ROKU, FSLY and JMIA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.