A bull market hasn't arrived yet. But the good news is that period of market growth is on its way. History shows us bull markets always follow tough market times. To prepare, it's a great idea to stock up on a couple of high-growth companies -- these players often suffer during bear markets, leaving them at reasonable valuations. So, you can pick them up cheap today and likely benefit down the road.
Which stocks to buy? I'm thinking of leaders in two supercharged industries. Electric vehicle (EV) giant Tesla (TSLA -2.25%) and e-commerce and cloud computing powerhouse Amazon (AMZN 0.31%). They have what it takes to benefit from the double-digit growth forecast for each of those markets. And they could drive the bull market's next big run. Let's find out more.
1. Tesla
Last year marked a record one for Tesla. The EV maker reported its highest quarterly revenue, operating income, and net income in the last three months of 2022. Net income for the full year more than doubled. And Tesla reported operating margin at industry high levels. The company accomplished all of that in spite of headwinds such as higher inflation and negative currency impact.
So, investors were disappointed when they saw a drop in Tesla's earnings and margin in the first quarter of this year. But this isn't necessarily a negative thing. Tesla's cut vehicle prices and this is weighing on earnings now -- but this focus on price should help the company maintain and grow market share over the long term.
S&P Global Mobility forecasts that 40% of new cars on the road by 2030 may be EVs. Tesla today is positioning itself -- making its EVs more affordable -- so it can benefit. Even with Tesla's price cuts, the company says its operating margin declined at a "manageable rate." Tesla predicts efficiency gains at its new production factories and a decrease in logistics expenses moving forward. This should help support margins.
Investors also may benefit down the road if Tesla's plan for robotaxis takes shape. Chief Executive Officer Elon Musk told CNBC in a recent interview that autonomous-driving Teslas as taxis could be the next thing. Tesla earnings and share price may soar if this program is successful.
Today, Tesla shares trade for 50 times forward earnings estimates, much lower than its valuation of the past. Considering Tesla's EV prospects and potentially a robotaxi program, the company's stock could advance in a big way during a bull market.
2. Amazon
Amazon's earnings and share price suffered last year as economic headwinds multiplied. Higher inflation meant higher costs and less consumer spending. Plus Amazon faced its own problems like excess capacity across its fulfillment network.
But Amazon has demonstrated it can manage these problems -- and is preparing itself for success down the road. The company did this by improving its cost structure. It announced 27,000 job cuts this year. It has reduced investment in certain areas, while increasing investment in key growth areas like technology infrastructure.
These efforts are starting to show results. In the first-quarter earnings report, Amazon posted progress in operating income. And it reduced the free cash flow outflow to $3.3 billion from more than $18 billion.
Amazon continues to make moves that should boost earnings over time. For example, it's reorganized its U.S. fulfillment network -- now, its model is regional instead of national. This will lower costs and speed up package delivery.
Amazon also is making a move that should ensure its dominance in cloud computing. Amazon Web Services (AWS) is directing clients on tighter budgets to its lower-cost data storage options. Yes, this results in lower income for Amazon now. But AWS is keeping customers loyal. And this means they're likely to continue with AWS when they have more to invest in cloud services.
Today, Amazon trades for around its lowest in relation to sales in about seven years. This is cheap considering the company's progress during these tough times -- and future growth potential. Like Tesla, Amazon has what it takes to lead gains in the next bull market. And that's great news for investors who get in on these growth players today.