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The stock market has brought huge profits to many investors over the years. It’s never too early or too late to plan for a better financial future. While the types of stocks you buy and even your risk tolerance can change over the course of your investment, it’s always a good time to own quality businesses that are poised to deliver meaningful growth over the long term. .
Whether you’re a beginner or an experienced investor, you won’t want to overlook these two names when building your basket of winning stocks.
1. Apple
apple (AAPL 0.06%) The company’s stock achieved a total return of approximately 350% over the next five years, thanks to continued dividend increases and strong stock price performance. To give you an idea of how impressive this number is, S&P500 Achieved 100% total return within the same period.
Economic headwinds come and go. There’s no denying that changes in consumer spending are impacting most growth-oriented companies, and tech giants are no exception, but Apple still maintains a large outer moat. The company’s smartphone business is the main driver of this moat and continued growth. This is despite the recent slowdown in sales of some of its other hardware products, as well as increased competition in China, its third largest market.
Smartphone sales accounted for $70 billion of Apple’s $120 billion in net sales for the first quarter of fiscal 2024, the company announced on February 1st. Currently, Apple’s main driver is its services department. A collection of subscription-based products. It’s worth noting that net services revenue for the quarter totaled $23 billion, an 11% increase from a year ago.
Apple does not separately report advertising sales. Advertising sales are included in the overall Services segment. But the advertising potential across the company’s app family and through the App Store is a secret weapon that remains underutilized. According to a study by Statista, advertising sales could generate more than $6 billion in revenue for the company in 2024 alone, which is still only a portion of overall revenue, but by no means insignificant.
It’s notable that Apple’s business is increasingly balanced between asset-rich and asset-poor parts, and the fact that subscription-related revenue is growing so rapidly. Services segment sales in recent quarters were about three times higher than Mac or iPad sales. Consumers may be hesitant to shell out hundreds or thousands of dollars for a brand new iPad or Mac right now, but they’re more likely to pay additional subscription fees for music, news, and streaming entertainment. , which is a more reasonable expense.
Apple may be one of the most well-known companies in the technology industry. Its history of innovation and continued expansion across all market environments has made Apple a workhorse for many investors. The company is also well-positioned to face short-term challenges, with $173 billion in cash and investments on hand. This stock looks like a worthy addition to a well-diversified portfolio in 2024 and beyond.
2. Amazon
Amazon (AMZN 0.82%) has had to contend with a difficult environment in recent years, but its focus on operational efficiency and profitability is paying off. Full year 2023 was an excellent result for the business on many fronts. In addition to strong earnings and cash flow, we achieved steady growth across our core businesses.
In 2023, net sales increased 12% year over year to $575 billion, and net income increased by a whopping $30 billion, compared to a net loss of $2.7 billion in 2022. Looking beyond the previous year, Amazon’s net sales and net income in 2023 grew 105% and 150%, respectively, from 2019.
Right now, the company’s cloud division, Amazon Web Services (AWS), is its most notable driver of profitability. Of Amazon’s total operating profit of $37 billion in 2023, $25 billion came from his AWS. Operating cash flow for the past 12 months increased by 82% to $85 billion, and free cash flow for the same period amounted to $37 billion.
Concerns about personal discretionary spending remain at the forefront. Amazon reported that customers purchased more than 1 billion items on its e-commerce platform through deal-driven Black Friday and Cyber Monday events. In 2023, millions of new customers added Prime membership to their accounts. Customers also bought more items on Amazon during his 2023 holiday season than in any previous year on record.
Online store sales contributed $232 billion to Amazon’s total 2023 net sales, while fees earned from third-party seller services added $140 billion to sales. E-commerce remains Amazon’s biggest driver of revenue growth, followed by AWS, advertising services, and subscription-based services.
Amazon is incorporating artificial intelligence (AI) solutions into many of its properties, from improving product listings on its flagship e-commerce platform to driving better advertising decisions for AWS services. for example, Mitsubishi UFJ Financial Group, Inc. has signed a multi-year agreement with AWS that includes deploying Amazon Bedrock, a generative AI application builder, to more than 100 new use cases for financial services businesses.Similarly, major biopharmaceutical companies amgen plans to further strengthen its existing partnership with the company and streamline its drug development process using Amazon SageMaker, a cloud-based machine learning platform.
There’s a lot to like about Amazon’s flagship products and new trends in business growth. Investors may think now is the perfect time to take advantage of the stock’s long-term potential before its price rises.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Rachel Warren has positions at Amazon and Apple. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.
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