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2 Top Growth Stocks to Buy Right Now

By Will Ebiefung – Aug 6, 2021 at 8:15AM

Key Points

  • America has largely reopened from the pandemic. And this means new challenges and opportunities.
  • Amazon and Revolve Group are quickly adapting to this new reality, which is good news for investors.

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Do you want to turbocharge your investment portfolio? Consider Amazon and Revolve Group.

Companies don't consistently beat the market by following the well-beaten path. Instead, they create value for their shareholders by tackling existing markets in exciting new ways. Amazon (AMZN -1.44%) and Revolve Group (RVLV 6.93%) fit the bill as they revolutionize the e-commerce and cloud computing industries. Keep reading to find out why these stocks could supercharge your investment portfolio. 

Amazon

With consistent double-digit growth and a proven blue-chip business, Amazon has the best of both worlds. And despite weaker-than-expected second-quarter earnings, the e-commerce giant can maintain its long-term success through the continued dominance of its industry-leading cloud computing business, Amazon Web Services (AWS). 

Second-quarter revenue grew 27% to $113 billion, which isn't too shabby for what is already the third-largest company on earth by sales. Amazon expects third-quarter revenue of $106 billion to $112 billion, which at the midpoint is up 13% against the prior year but below the consensus estimate of $119 billion.

The guidance led to a 5% decline in the stock, which could be an entry point for new investors who keep a long-term perspective and ignore the bumps in the road. 

Bullseye on dollar symbol.

Image source: Getty Images.

Amazon will go against some tough comps this year in its e-commerce segment as pandemic-related tailwinds fade away. But the company's long-term thesis remains intact -- especially for its high-margin cloud computing segment, which represents 54% of operating income. 

AWS grew by an impressive 37% to $14.8 billion in the period. And with analysts expecting the cloud storage market to expand at a compound annual growth rate of 22% until 2027 as more businesses transition from on-premise storage, Amazon has plenty of runway with this opportunity. The company is still milking its first-mover advantage, boasting a 32% market share compared to a 19% share for Microsoft Azure, its closest rival. 

Revolve Group

With shares up 129% year to date, Revolve Group has bounced back tremendously from the coronavirus pandemic. Granted, with a market cap of $5.3 billion, the company isn't cheap anymore. But the fast-growing online fashion retailer can maintain its momentum with its innovative social-media-driven growth strategy and burgeoning profitability. 

The United States has reopened, which means Revolve Group's business model can shine. Instead of relying on traditional advertising methods like display ads or billboards, the company has fully embraced the influencer economy, pampering a network of over 3,500 influencers to promote its brand and clothing to their followers. Now that people are back to social outings, Revolve reports a surge in new customer acquisition and the reactivation of previously dormant accounts. 

Second-quarter net sales grew 60% to $229 million, while profits soared 122% to $31.5 million. The company's Forward segment, which focuses on selling established designer brands, is performing particularly well, with its sales up 151% year over year to $40 million.

Management hasn't provided guidance, but it expects continued success as it invests in inventory and marketing. With a forward price-to-earnings ratio of 82, Revolve Group stock is more expensive than brick-and-mortar apparel brands like The Gap, which trades for a P/E of just 19. But the company deserves its premium valuation because of its rapid growth and unique marketing strategy, which can help sustain its expansion.

What's your investment strategy? 

Amazon and Revolve Group boast innovative strategies to create value in their respective industries, but they suit different investment approaches. Amazon is better for investors who prefer a stable and proven business, while Revolve might offer more potential for multibagger returns because it is much smaller and faster-growing. 

 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Microsoft, and Revolve Group Inc. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

Stocks Mentioned

Amazon.com Stock Quote
Amazon.com
AMZN
$94.13 (-1.44%) $-1.37
Revolve Group Stock Quote
Revolve Group
RVLV
$28.69 (6.93%) $1.86

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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