Warren Buffett has become an investing legend because of his general philosophy of focusing on value stocks. However, it seems there are many investors these days that love businesses growing their revenue and earnings power at high rates. Maybe these kinds of companies can help your portfolio outperform.
I think investors should become familiar with what I think is the ultimate growth stock to buy right now. It looks like a smart place to park $1,000 of your capital for the next five years or more.
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Revving the growth engine
There might be no story more impressive in the past couple of decades than the monster rise of Amazon (AMZN 2.48%). As it went from selling books online in the 1990s to now becoming an "everything store," this business has evolved into a true tech-forward powerhouse. These days, Amazon benefits from multiple growth tailwinds that continue propelling it into the future.
First and foremost, Amazon is known primarily as an e-commerce juggernaut. This isn't a flawed view. The company has a commanding lead in online shopping in the U.S. Its marketplace is extremely popular thanks to low prices on a vast selection of goods, coupled with fast and free shipping. The success of the Prime membership also drives greater consumer spending and frequency on the site.
However, there is still a lot of expansion potential in this mature segment for Amazon. In 2022, CEO Andy Jassy wrote, "Amazon currently only represents about 1% of the worldwide retail market segment share."
Digital advertising is another growth vector that is supporting faster sales gains than the rest of the business. In Q1, Amazon generated $13.9 billion in revenue from ads, which was up 18% year over year. This makes it a key player in the global digital advertising market, something that most investors are probably surprised by.
Then there's artificial intelligence (AI), an area that Amazon Web Services (AWS) is focused heavily on. Companies of all sizes have already turned to AWS as a mission-critical IT partner. Now with AI innovation becoming table stakes, AWS is building new cloud-based tools and features for its customer base to leverage this revolutionary technology.
Amazon will also continue to push into new areas, as it has done in the past. For instance, the company acquired Whole Foods in 2017 for $13.7 billion, bolstering its positioning in the massive grocery market. Amazon has a presence in healthcare. And it's working on autonomous vehicles with Zoox.
Can Amazon stock double by 2030?
Investors don't have to look hard to find a fantastic growth stock. Amazon is one of the largest and most valuable businesses on the face of the planet, with trailing-12-month revenue of $650 billion and a market cap of $2.2 trillion. Even with its massive scale, there is upside for shareholders.
But can Amazon stock double in five years? Here's what investors should be thinking about.
Revenue will likely keep increasing at a double-digit pace. In the past five years, sales rose at a compound annual rate of 15.6%. That pace might slow, but it will still be significant, especially for a business this size.
That top-line growth will drive even better bottom-line gains. We've already seen this play out, as the leadership team is emphasizing boosting profitability by running a more efficient organization. Earnings per share (EPS) jumped 91% in 2024. And consensus estimates from Wall Street analysts see EPS growing at a yearly clip of 17.2% over the next three years. Extending this to the rest of the decade, it's likely that Amazon's earnings should at least double by 2030.
The last important variable to consider, though, is valuation. As of June 23, shares trade at a price-to-earnings (P/E) ratio of 33.9. For a company as dominant as Amazon, I don't think this is an expensive multiple. This puts prospective investors on a clear path to possibly doubling their money in five years by owning Amazon, the ultimate growth stock.
