Most investors want a few proven winners in their portfolios, even if they're focused on growth stocks. The two aren't mutually exclusive. Some established industry leaders still have incredible growth prospects, and they come with the added benefit of reliability.
Amazon (AMZN 0.59%) and Disney (DIS -0.13%) are both powerhouse leaders that are gaining momentum this year. Which one is the better buy today?
The case for Amazon: The dominant player in two high-growth businesses
It's easy to see why Amazon is an amazing stock to own, but the picture becomes even clearer once you dig into the details.
Amazon accounts for almost 38% of all U.S. e-commerce. The No. 2 spot goes to Walmart, which has 6.4%. That's a lead so large it's an impenetrable moat, at least in the near term. Management is making moves to keep it that way and even widen its lead. It's getting more products to more customers faster so shoppers know it's their go-to source for essentials and more. Since e-commerce is growing faster than overall retail, Amazon is well positioned to capture greater market share.
Amazon Web Services (AWS) similarly is the leading provider of cloud solutions for businesses, with 31% of the market according to Statista. Microsoft's Azure is in the No. 2 spot with 24%. It's not the same impenetrable lead as in e-commerce, but it's wide, and Amazon is playing offense to stretch that lead. It's pouring millions into developing generative artificial intelligence (AI) services that could be game changers for its clients, such as tools to create code, images, and full marketing campaigns based on prompts. It also has a strong pipeline of new deals, and management expects that growth will begin to accelerate again sometime in the near future.
One of Amazon's newer ventures is its advertising business, which accounts for less than 9% of sales but provides a strong growth engine, increasing 27% year over year in the fourth quarter. Like AWS, it's a lean, service-oriented business with high margins, and it's contributing to Amazon's growing operating income.
Amazon has a robust streaming business that sits right along the top networks, and it's also making strides in healthcare, where it's just getting its feet wet and learning about the business. Stay tuned for Amazon to launch new healthcare services as it sets out to transform the industry.
This is only some of what's happening at Amazon today, and there's a lot to look forward to as Amazon continues its journey.
The case for Disney: All of its parts are working together again
Disney also has multiple parts, but they center around the entertainment industry. Depending on who you ask, Disney is best known for its unparalleled theme parks or industry-dominating films and franchises, but content distribution on linear networks and now streaming are also a big part of its model.
Disney operates 12 global theme parks plus other experiences such as cruises and resorts. Demand is booming for its popular destination parks, and Disney has raised prices several times over the past few years. Parks revenue increased 7% year over year in the 2024 fiscal first quarter (ended Dec. 30), and Disney is investing $60 billion in improving and expanding parks to create a broader range of physical experiences for guests.
Management recently restructured, and all of its media and networks are now reported under a segment called "entertainment." This segment reported a 7% sales decline in the first quarter, mostly due to cord-cutting and pressure in its ad-based networks. But it's making progress in turning Disney+ profitable, and streaming operating loss contracted from $984 million last year to $138 million this year in the first quarter. That's getting close to positive, and CEO Bob Iger reiterated that streaming is expected to become profitable by the end of the year.
Disney has an unbeatable film and content creation system that populates its streaming efforts and consistently accounts for more top box office hits than its competition. Three of the top 10 movies in ticket sales in 2023 were Disney films, and Disney typically releases several sequels or franchise-based films in a given year in addition to developing new characters and franchises. This fuels the cycle of its magic-creation and generates loyalty, fans, sales, and opportunity.
Management is also working on a deal to turn ESPN into an expanded sports experience. It announced a new streaming service together with Warner Bros. Discovery and Fox to offer a complete network for sports fans and plans to offer other services like e-commerce and betting.
There's a lot in store for Disney shareholders in 2024 and beyond, and this could be the year that Disney stock finally reaches an all-time high.
Two amazing stocks to choose from
Disney stock is up 32% this year, and Amazon stock is up 20%. Disney started off the year with more to catch up on than Amazon, which has been soaring over the past year while Disney was still down in the dumps.
Both of these stocks should continue to reward shareholders this year and in the future. Disney stock is likely to explode when streaming hits profitability and as its business continues to bounce back, but Amazon still has more overall tailwinds. Disney also comes with some added volatility as it needs to choose a CEO to take over for Bob Iger over the next two years. So for today's verdict, I'm going to go with Amazon as the better buy.
