Should You Forget Amazon Stock? Why These Unstoppable Stocks Are Better Buys

Investors have long been impressed by the strength and resilience of Amazon. Despite being a massive company, Amazon continues to experience significant growth in its key areas of e-commerce, cloud computing, and artificial intelligence (AI).

However, with a market capitalization now exceeding $2.3 trillion, the company may be nearing a point where maintaining high growth rates could become more challenging. As a result, investors might want to look at other consumer-focused stocks that offer a more promising potential for rapid growth. Here are two alternative stocks that could yield better returns than the e-commerce and cloud leader.

Celsius

At first glance, an energy drink ranking third in the market might not seem like a strong stock pick. However, investors should take a closer look at Celsius (CELH). This brand has distinguished itself by promoting natural ingredients, winning over many health-conscious consumers.

The company's sales surged after it entered into a distribution agreement with PepsiCo, making its energy drinks available in bulk through outlets like Amazon and Costco.

Unfortunately, distribution troubles led to a stock decline of over 70% from its peak last year since a major distributor, likely PepsiCo, significantly cut its orders. Nevertheless, it is expected that this distributor will adjust its orders in the future, which should reduce the impact of this issue.

Furthermore, sales have reached $1 billion in the first three quarters of 2024, achieving a 5% growth. Although this is a stark decline from the staggering 104% growth year-over-year in the first nine months of 2023, it is still a positive trend.

International sales only constituted 5% of Celsius' revenue during this period, but revenue in Europe and the Asia-Pacific regions grew by 38% annually. Given the significant growth potential in these markets, overall sales growth is expected to improve as international markets contribute a more substantial share of revenue.

Moreover, the stock price drop has lowered its price-to-earnings (P/E) ratio to 41, which is close to its multi-year lows. If Celsius can maintain sales growth that matches its international momentum, its stock may recover and continue to rise.

Alibaba

On the other hand, investors looking to outpace Amazon within similar industries might consider Alibaba (BABA), often regarded as the "Amazon of China."

Concerns over a potential trade conflict with the U.S. have negatively impacted the shares of many Chinese firms, even though Alibaba has minimal exposure to the U.S. market. Additionally, the slowing economy in China, coupled with nearly $3.8 billion in fines for regulatory violations from 2021 to 2023, has put pressure on its stock price.

Despite these challenges, one might argue that the sell-off of Alibaba stock is exaggerated. The stock is down approximately 75% from its peak in 2020 and even lower than its IPO price in 2014!

This decline has resulted in a P/E ratio of just 17, significantly lower than Amazon's ratio of 48, reflecting considerable multiple compression. Also, with a forward P/E ratio of only 10, investors may not fully recognize the growth potential that lies ahead.

While some argue that Alibaba is cheap for a valid reason, the company's revenue for the first half of fiscal 2024 was $68 billion, marking only a 5% increase compared to the previous year. This is a considerable slowdown from the 31% growth achieved in 2021.

Nonetheless, the net income of nearly $10 billion in the same period increased by 13% year-over-year, indicating that Alibaba's profits are rising faster than expected, which may not justify its low forward P/E ratio. This could lead to rapid growth in its stock price if negative sentiments decline during the year.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Healy has positions in Celsius. The Motley Fool has positions in and recommends Amazon, Celsius, and Costco Wholesale. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

Amazon, Celsius, Alibaba