With 2023 now more than half over, investors might be wondering where the next big market opportunities can be found. Companies including Apple, Microsoft, and Nvidia have all gone on to hit record valuation highs within the past month, and it looks like artificial intelligence (AI) and other trends could continue powering strong performance for these top mega-cap stocks.
On the other hand, investors who are wary about buying at (or near) stock valuation highs still have some attractive opportunities on the table. If you're looking for top investment candidates this month, read on to see why putting your money behind Amazon (AMZN 0.80%) and Roblox (RBLX 2.39%) would be a smart move.
1. Amazon
With industry-leading positions in e-commerce and cloud-infrastructure services, Amazon continues to be one of the world's strongest and most influential businesses. It's also a top mega-cap stock that continues to offer attractive upside for long-term investors. Even after an impressive rally this year, the company's share price remains off 30% from its high, and there's a good chance that the tech giant's valuation will bounce back and go on to reach new heights over the next few years and beyond.
Rising costs and slowing growth have caused Amazon stock to see some volatile trading over the last year, but its core business pillars continue to look strong and have plenty of room for long-term growth.
In the first quarter, the company's Amazon Web Services (AWS) cloud-services unit grew revenue 16% year over year to reach approximately $21.3 billion and posted an operating income margin of 24%. Admittedly, this was down from the 20% year-over-year growth and 24.3% operating margin that the business posted in last year's fourth quarter, and the cloud business could face some ongoing headwinds in the near term.
While management has said that revenue growth for AWS may see further deceleration in the face of economic pressures this year, the outlook a bit further down the road is more promising. As the leading provider of cloud infrastructure services, Amazon remains in the early stages of benefiting from the evolution of artificial intelligence. CEO Andy Jassy expects a deluge of cloud-services demand to emerge over the next few years thanks to the rise of artificial intelligence and machine-learning applications, and demand will likely continue to grow from there.
AI could also lead to advancements in robotics and automation that transform Amazon's massive online-retail business. The company's North America business segment generated revenue of roughly $76.9 billion in the first quarter, with the large majority of that coming from e-commerce services. On the other hand, the business generated just $898 million in operating income in the period -- representing an operating income margin under 1.2%.
Warehouse and delivery automation open the door for e-commerce margins to climb substantially above current levels. Along with continued growth for AWS and other smaller business units, there's good reason to think that Amazon's massive sales base will become significantly more profitable over time.
2. Roblox
With all the excitement surrounding AI lately, it seems like interest in the formerly red-hot metaverse trend has faded. It probably won't stay like that forever. For investors interested in benefiting from the ongoing rise of online virtual worlds, Roblox looks like a smart play in the space.
While those unfamiliar with the platform might think that it's simply a video game, Roblox is actually a platform for thousands of unique experiences. Most of the content on Roblox is produced by independent creators. In addition to the thrill of creating media for other users to enjoy, creators receive in-platform currency that can be exchanged for real money if they attract players to their experiences.
Roblox's model of allowing users to create and monetize content has continued to bear fruit. The number of developers who earned money through the platform rose 63% year over year in March to reach 4 million, and total money earned by the platform's development community increased 24% to reach $182 million in the quarter that ended that month.
Thanks to the consistent addition of new content to the platform, Roblox has been able to continue attracting new users and keep those already on board with its service engaged. After a period of challenging performance comparisons as the business lapped quarters that benefited from elevated, pandemic-driven engagement, the business is back to posting record results across key metrics.
Average daily active users on the platform rose 22% year over year in the first quarter to hit 66.1 million -- an all-time high. Meanwhile, revenue rose 22% year over year to hit $655.3 million and bookings increased 23% to hit $773.8 million -- both also best-ever performances for the period.
With the company having returned to posting strong growth and its share price down 69.5% from its high, Roblox stands out as an attractive buy-and-hold investment at today's prices.
