With inflation increasing the cost of living, long-term investing is more important than ever for securing your financial future. And while $300 may not look like much, it can be a good start on this journey. Let's discuss why Amazon (AMZN 1.30%) and Luckin Coffee (LKNC.Y -0.32%) should be on your investment radar.
1. Amazon
Most companies find one niche and ride it until the wheels fall off, but Amazon is different. The e-commerce giant has a track record of successfully pivoting to new growth drivers (such as cloud computing and digital advertising). And its new satellite internet business, project Kuiper, could become the next pillar of expansion and diversification.
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Elon Musk's privately held SpaceX has demonstrated the technical and commercial viability of satellite internet constellations with Starlink. The platform offers services in dozens of countries, including Ukraine, where it is crucial to the Ukrainian army's communication system amid the Russian invasion. Amazon's project Kuiper plans to tap into this market by providing fast, affordable broadband connections around the world via a fleet of low Earth orbit (LEO) satellites.
Amazon plans to launch its production satellites in 2024. And although it is too soon to predict the impact this will have on the bottom line, an increase in global internet penetration could have massive synergistic effects on the company's e-commerce and cloud computing businesses by bringing in new potential customers on the internet.
With a price-to-earnings (P/E) multiple of 57, Amazon's stock is significantly more expensive than the S&P 500's average of 21.
But the premium makes more sense when considering the near-term margin erosion in the company's core operations. This headwind is largely due to inflation, pandemic-era expansion, and macroeconomic uncertainty among clients. But analysts at Morgan believe these challenges are transitory and unlikely to persist for the long term.
2. Luckin Coffee
As the stock that single-handedly saved my portfolio during the 2022 bear market, Luckin Coffee isn't a buy-the-dip opportunity -- it's a chance to buy the rally. Up by a whopping 183% over the last 12 months, the soaring Chinese coffee shop may have more room to run as its burgeoning profitability and geographic expansion take shape.
After emerging from bankruptcy restructuring in April 2022 following its previous management's accounting scandal, Luckin Coffee has hit the ground running. Fourth-quarter sales surged 52% year over year to $535.7 million on the back of a jump in monthly transacting customers to 24.5 million. While the coffee shop market is competitive, Luckin aims to disrupt it with a technology-led strategy.
Its stores use what management calls an "online-offline model," where consumers can order and pick up their items without needing to interact with a cashier or handle cash. After demonstrating the viability of its strategy in China, Luckin is now expanding to other South Asian markets, including Singapore -- a country with a significant Chinese diaspora, where consumers may share similar tastes.
With a price-to-sales (P/S) multiple of 4.6, Luckin Coffee trades at a significant premium over the S&P 500 average of 2.3. But the price tag looks justified, considering its rapid expansion and profitability. The company generated an operating income of $45.4 million in the fourth quarter.
Which stock is best for you?
While Amazon and Luckin Coffee are both great picks, they have some differences. As a large and established company that is currently down on its luck, Amazon is a comeback story. Investors should have faith in management's ability to repair the core businesses while tapping new opportunities like satellite internet. Luckin is a much less mature company that's finally getting into its groove. But while it is less established, it probably has more long-term growth potential.
