Building wealth through the stock market can be straightforward if you focus on holding shares in consistently growing companies over time. Over recent years, a select group of growth stocks, known as FAANG stocks—which include Meta Platforms (formerly Facebook), Apple, Amazon, Netflix, and Alphabet (formerly Google)—has become synonymous with successful investing. These stocks possess solid competitive advantages and favorable long-term prospects. Among these, two stocks stand out for their potential to outperform the S&P 500 in the coming years: Amazon and Netflix.
Amazon: A Powerhouse of Growth
Amazon boasts impressive trailing-12-month revenue of $604 billion and continues to expand at a rate that supports expectations for outsize returns. In the latest quarter ending June 30, Amazon reported a year-over-year revenue increase of 12%. While growth in online retail remained modest at 6%, non-retail sectors, such as cloud computing and advertising, experienced significant growth, showcasing Amazon’s diverse revenue streams.
The company’s efficiency improvements in fulfillment—achieving delivery of over 5 billion packages within one day—illustrate its growing competitive edge in e-commerce. This faster shipping not only enhances customer satisfaction but also encourages more frequent orders across its platform. During the second quarter, Amazon’s operating income nearly doubled to $14.7 billion, indicating robust profit margins that are expected to improve further as the company continues to streamline costs through automation and optimized logistics.
Analysts project that Amazon’s earnings will grow at an impressive annualized rate of 22% in the coming years. Even with a conservative price-to-earnings (P/E) ratio forecast, investors could see substantial gains, potentially doubling their investment by 2030.
Netflix: Streaming to Success
Netflix has solidified its position as a leader in entertainment, now serving 277 million subscribers. However, its growth story is far from over. The company continues to post double-digit revenue growth, supported by strategic initiatives that enhance profitability, such as curbing password sharing and scaling its advertising model.
In its latest quarterly results, Netflix recorded nearly 17% growth in revenue and a robust increase in global subscriptions. The company’s operating margin reached an impressive 27%, with management focused on increasing profitability each year. The global scale of broadband access presents a vast opportunity for Netflix, which has only tapped a small portion of potential connected TV users.
The company’s future growth prospects are promising, with analysts predicting Netflix’s earnings could grow by 27% annually. A forward P/E ratio of 31 for 2025 reflects a reasonable valuation in light of this growth potential, setting the stage for substantial stock appreciation and market-beating returns over the next several years.
In conclusion, both Amazon and Netflix embody strong investment opportunities poised to outperform the broader market. As investors look for growth-oriented stocks that can deliver substantial returns, these companies stand out for their resilience, innovative strategies, and capacity for expansion.
Before making any investment, it’s important to research thoroughly and consider a diversified approach to portfolio management. Whether you choose to delve into the world of FAANG stocks or explore other emerging opportunities, prudent investing can lead to rewarding outcomes over time.