Shares of e-commerce and cloud computing giant Amazon.com (NASDAQ:AMZN) have delivered incredible returns to investors. The stock is up 68% over the past year, nearly 300% over the past three years, about 1,900% over the past decade, and more than 86,000% since the company went public in 1997. It's been quite a ride.
But with Amazon now valued at more than $800 billion, it will be difficult for the stock to put on an encore performance. Three of our contributors think Alibaba Group (NYSE:BABA), Aphria (NASDAQOTH:APHQF), and Target (NYSE:TGT) could prove to be better investments than Amazon going forward. Here's what you need to know.
Forget Amazon. This market is 4 times bigger
Rich Smith (Alibaba Group): Empires rise, and empires fall. Once upon a time, Microsoft was the dominant name in the tech industry, but it got too big, too dominant, and raised too big a "blip" on the radar screens of antimonopoly regulators. After nearly a decade of antitrust litigation, Microsoft is still hanging around today -- but it doesn't even merit a letter in the "FANG" acronym of popular internet stocks.
I see that same risk threatening Amazon.com -- letter "A" in the aforementioned acronym -- today, and it makes me wonder: Who will take over when Western governments start hobbling Amazon's growth with lassos of red tape?
I wonder if it might be Alibaba?
Essentially China's answer to Amazon, Alibaba operates in a market four times as large as the U.S. and nearly twice as large as the U.S. and Europe combined. (The EU was also a fierce critic of Microsoft's monopolies back in the day.) But whereas the U.S. and EU actively oppose monopolies, China seems to almost prefer them, nurturing businesses until they attain the status of national champions.
This suggests to me that Alibaba's growth prospects in China are probably quite a lot bigger than Amazon's prospects in America -- the more so given that Alibaba, at $36 billion in annual sales, still has a lot of room to grow before it matches Amazon's $193 billion. And as China continues to expand on its "One Belt, One Road" initiative to develop trade all the way from China to Europe, I suspect Alibaba's growth prospects could be even bigger than China.
This industry could be the next e-commerce
Neha Chamaria (Aphria): Amazon's exponential rise can largely be credited to its first-mover advantage in a high-potential market and an unstoppable aggression to grab every opportunity to grow that came its way. Much like e-commerce, I see another market that's on the brink of explosive growth: marijuana.
Canada is inching closer to the legalization of recreational marijuana. While it's difficult to predict the exact timeline, it will likely eventually happen and open up a multibillion-dollar market for marijuana producers. For now, medical marijuana is already legal in Canada, and one company that's making the most of it is Aphria, a licensed Health Canada medical marijuana producer and one of the largest players in the market.
Aphria is among the few cannabis companies that are profitable, thanks to a rapidly growing top line and a tight grip on costs. The company is aggressively expanding its capacity and looks set to become the third-largest supplier in terms of production. A couple of major acquisitions and strategic partnerships in recent months should not only speed up Aphria's production, but also catapult its presence in international markets, which should act as an advantage in a competitive industry.
Aphria delivered strong numbers in its most recent quarter. While share dilution remains a concern, Aphria's growth could overshadow it in the long run given the potential in marijuana.
No longer on the sidelines
Tim Green (Target): After years of largely ignoring online retail, Target has taken some aggressive steps in the past few months. It acquired start-up Shipt late last year, using it to roll out same-day delivery at some of its stores. It launched free two-day shipping on orders over $35 in March, with the minimum waived for REDcard holders. And it revamped its next-day Restock service for essentials, beating out Amazon Prime Pantry on both cost and delivery speed.
Target has been able to do all of this because it's using its stores as the core of its e-commerce operations. Target has more than 1,800 stores in the United States, and each can act as a mini distribution center, with store employees assembling and shipping online orders. Shipping heavy boxes full of home essentials for next-day delivery without exorbitant fees is possible because these orders are coming from nearby stores, not far-away distribution centers.
These fast shipping initiatives still won't be cheap for Target, so there could be some pressure on the bottom line as the company ramps up its e-commerce business. But Target has very quickly gone from being an also-ran in online retail to a disrupter. If these initiatives successfully boost Target's online sales growth, the stock could certainly outperform Amazon.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neha Chamaria has no position in any of the stocks mentioned. Rich Smith owns shares of Alibaba Group Holding Ltd. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.