No one knows where the markets are headed this year or next, but investors don't have to time the market to be successful. When the markets get choppy, you can almost never go wrong by putting money to work in companies that dominate their industries and still have opportunities to grow over the long term.
This is why investors should consider buying shares of Amazon (AMZN 2.11%) and Tesla (TSLA -0.57%). These two tech leaders are still getting better at what they do and stand to earn investors great returns from their current highs.
1. Amazon
Amazon's growth in online retail and cloud services delivered incredible returns to investors over the last decade. Even if you had waited until 2015 to invest, the stock would have still delivered a return of 400% -- but it's not too late.
Amazon is cheaper than it's been in a long time. Comparing the stock price to how much cash Amazon's business produces from operations, the valuation is toward the bottom end of the trading range over the last decade.
Data by YCharts.
The stock appears undervalued, considering that e-commerce is still a small fraction of global retail sales. Another sign of Amazon's ability to continue growing is the recent results from Piper Sandler's Taking Stock with Teens Survey for Spring 2023, where 57% of teens said Amazon was their top shopping destination.
The results of the survey show that, even with a new generation of shoppers, there just isn't a replacement for Amazon. Amazon has more than half a billion square feet worth of fulfillment center capacity, which lends to industry-leading selection and shipping speed.
Beyond e-commerce, cloud services (Amazon Web Services) generate most of the company's profit, and prospects for more double-digit growth look solid.
Amazon has invested in custom processors for artificial intelligence workloads as customers show increased interest in using artificial intelligence models with their data. Statista expects the cloud market to grow just under 14% per year through 2027. Amazon should continue to grow its most profitable business in step with that estimate.
Given the long runway of growth in e-commerce and cloud services, Amazon stock can still deliver market-beating returns to investors.
2. Tesla
Tesla stock has delivered a return of about 1,000% over the last five years. While the stock won't always climb at that rate, investors should be happy to own the stock for many years.
The stock is up 75% this year despite Wall Street's concerns over price cuts and competition in China. But Tesla's automotive revenue still increased 46% year over year in the second quarter -- an impressive accomplishment in a weak environment for auto sales.
Tesla has already built a top consumer brand that is widely recognizable, yet its product is far from mass-market adoption. A key advantage that will allow Tesla to reach mass adoption of its vehicles one day is increasing manufacturing efficiency.
Tesla is one of the best manufacturers in the world. A report from Bloomberg last year found Tesla's Fremont factory was beating other top car manufacturers, including one of Toyota's plants, in producing more vehicles per week in 2021.
The company is relentless in finding ways to get better, so it can sell more affordable cars at a healthy profit. Management is looking to reduce costs by as much as 50%, including the use of smaller factories that require less capital, but to still reach its long-term goal of making 20 million vehicles annually.
Tesla's operating profit margin has trended down over the last year as the company cuts prices, but investors just need to focus on its advantage in manufacturing because that will pave the way for more profitable growth. Looking at the big picture, margins have been trending higher in recent years and should continue to do so.
With the electric car maker's energy business starting to report higher gross profit, Tesla could become more profitable in the next five years than Wall Street is expecting. CEO Elon Musk is building one of the great companies of our time, which is why the stock always looks expensive by traditional valuation measures. I believe buying a small position now and adding to it over time would be a smart move for retirement savers.
