Finance
2 colossal growth stocks to buy in the new bull market and hold for years
The new bull market of 2024 has reawakened many investors’ interest in stocks. However, the truth is that quality companies haven’t gone anywhere. Stock prices may fluctuate, but good companies can weather turbulent times and deliver results that increase returns for investors.
If you’re looking for growth stocks that you can buy and hold for the long term, you don’t have to look far to find attractive companies. Here are two stocks — one a household name and the other a newer entrant in the cloud space — you might want to consider the next time you go shopping for your investment portfolio.
1. Amazon
Amazon (NASDAQ: AMZN) has continued to demonstrate its ability to boost its business amid the economic thick and thin, while relying on the growth of its core segments. The e-commerce platform remains one of the largest in the world and is still the largest source of revenue for Amazon.
Meanwhile, the company’s Amazon Web Services (AWS) segment continues to dominate the global cloud infrastructure space. As one of Amazon’s most asset-light businesses, it is responsible for the lion’s share of profits.
AWS also serves as the clearest example of Amazon’s continued commitment generative artificial intelligence and related tools for a wide range of customer use cases.
Tools like Amazon Bedrock (a service for building generative AI applications), Amazon Q (a generative AI chatbot), and Amazon Sagemaker (a platform that helps customers build and train machine learning models) are being used by large enterprises used to improve efficiency and improve customer experiences.
In the first quarter of 2024, Amazon’s total net sales were $143 billion, up 13% from the previous year. Of that total, $89 billion was attributable to e-commerce (online store sales and third-party service sales), $25 billion to AWS, and $11.8 billion to advertising. These are the three largest sources of income.
Net profit for the three-month period rose 225% year over year to $10.4 billion, while operating income rose 219% to $15.3 billion. Of that total operating revenue, $9.4 billion came from the AWS segment.
Once an ATM, Amazon ended the quarter with twelve-month free cash flow of $50 billion. If you’re looking for a simple stock with an established, wide moat on its key business drivers, Amazon remains a smart buy to keep adding to as the years progress.
2. Toast
Toast (NYSE: TOST) makes money selling restaurant software, hardware and financial technology solutions to small to medium businesses in the US, UK and Ireland. While still significantly down from its all-time high, the stock is up about 40% from the start of this year.
Investors have been much more cautious lately when it comes to growth-oriented companies that are not yet profitable. However, Toast operates in a fast-growing market and provides products and services that meet constant demand.
Currently, Toast makes most of its money from various financial technology solutions. These include transaction-based fees generated when a restaurant processes a payment using its platform solutions, as well as marketing and service loan fees for restaurant customers through Toast Capital.
These loans come from external partners, not from Toast itself. The company also generates revenue from recurring subscriptions and from hardware sales such as tablets and terminals.
In the first quarter of 2024, Toast achieved gross payment volume of just under $35 billion, an increase of 30% from a year ago. The total number of restaurant locations increased 32% year over year to 112,000, and the annual recurring run rate at the end of the quarter was $1.3 billion, up 32% year over year.
Currently, Toast is not profitable under generally accepted accounting principles (GAAP). However, it did report gross profit of $249 million last quarter, up 43% year-over-year, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $57 million.
Last quarter, Toast did not have positive cash flow, but reported $135 million in operating cash flow and $93 million in free cash flow for all of 2023. Management also aims for the company to achieve an operating profit (based on GAAP) by the first half of next year.
Growth is accelerating and management is following a defined roadmap to profitability. Toast currently controls about 13% of the US restaurant software market. That’s a significant portion of a broad, expanding market, but one that offers plenty of room. This stock could be an intriguing buy for long-term investors looking to gain exposure to this space and have a significant buy-and-hold horizon.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rachel Warren has positions in Amazon. The Motley Fool holds and recommends positions in Amazon and Toast. The Motley Fool has one disclosure policy.
2 colossal growth stocks to buy in the new bull market and hold for years was originally published by The Motley Fool
