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5 Stocks That Could Be the Next Amazon

Amazon.com, Inc. (NASDAQ:AMZN) has been one of the more impressive stocks of the past 25 years. In fact, AMZN now has returned nearly 100,000% from its IPO price of $18 ($1.50 adjusted for the company’s subsequent stock splits).

A large part of the returns have come from two factors. First, Amazon has vastly expanded its reach. What originally was just an online bookseller now has its hands in everything from cloud computing to online media to groceries. And its shadow is even larger. A potential entry by Amazon has rattled pharmacy stocks and medical distributors, among others.

Secondly, as a stock, AMZN has managed the feat of keeping a growth stock valuation for over two decades. I’ve long argued that investors can’t focus solely on the company’s high P/E ratio to value Amazon stock. But however wise an investor might the current multiple is, the market has assigned a substantial premium to AMZN stock for over 20 years now.

It’s an impressive combination — and one that’s likely impossible, or close, to duplicate. But these five stocks have the potential to at least replicate parts of the Amazon formula. All five have years, if not decades, of growth ahead. New market opportunities abound. And while I’m not predicting that any will rise 100,000% — or 1,000% — these five stocks do have the potential for impressive long-term gains.

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5 Stocks That Could Be the Next Amazon Stock: JD.com (JD) 5 Stocks That Could Be the Next Amazon Stock: JD.com (JD)Source: Daniel Cukier via Flickr

JD.com Inc(ADR) (NASDAQ:JD) is the company closest to following Amazon’s model. While rival Alibaba Group Holdings Ltd (NYSE:BABA) gets most of the attention, it’s JD.com that truly should be called the “Amazon of China,” as Will Healy pointed out in December.

Like Amazon (and unlike Alibaba), JD.com holds inventory and is investing in a cutting-edge supply chain. It, too, is expanding into grocery, like Amazon did with its acquisition of Whole Foods Market. A partnership with Walmart Inc (NYSE:WMT) should further help its off-line ambitions. JD.com even is cautiously entering the finance industry.

That ability to both provide best-in-class logistics and satisfy a wide range of customer needs is what has made Amazon a success. And while JD may not rise to the scale of Amazon, at its current valuation it doesn’t have to. After a recent pullback, JD trades at less than 26x forward EPS. That’s despite 40% revenue growth in 2017, and expectations for a 30% increase in 2018.

And it sets up a scenario where JD stock could — if sentiment finally turns in its favor for good — appreciate for years, thanks to both strong bottom-line growth and an expanding multiple from optimistic investors.

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5 Stocks That Could Be the Next Amazon Stock: Square (SQ) 5 Stocks That Could Be the Next Amazon Stock: Square (SQ)Source: Chris Harrison via Flickr (Modified)

Admittedly, I personally am not the biggest fan of Square Inc (NYSE:SQ) stock. I like Square as a company, but I’ve questioned just how much growth is priced into SQ already.

Of course, skeptics have done little to dent the steady rise in AMZN stock. And valuation aside, there’s a clear case for Square to follow an Amazon-like expansion of its business. Back in January, Instinet analyst Dan Dolev compared SQ to AMZN and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG), citing its ability to expand from its current payment-processing base:

In 10 years, Square is likely to be a very different company helped by accelerating share gains from payment peers and relentless disruption of services like payroll and human resources.

Just as Amazon used books to expand into e-commerce, and then e-commerce to expand into other areas, Square can do the same with its payment business. The small business space is ripe for disruption, as Dolev points out. Integrating payments into payroll, HR, and other offerings would dramatically expand Square’s addressable market – and lead to a potential decade or more of exceptional growth.

Again, I do question whether that growth is priced in, with SQ trading at ~about 12x the company’s 2018 guidance for “adjusted” revenue. But if — again, like AMZN — Square stock can combine a high multiple with consistent, impressive, expansion, it has the path to create substantial value for shareholders over the next five to 10 years.

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5 Stocks That Could Be the Next Amazon Stock: Shopify (SHOP) 5 Stocks That Could Be the Next Amazon Stock: Shopify (SHOP)Source: Shopify via Flickr

E-commerce provider Shopify Inc (NYSE:SHOP) probably doesn’t have quite the same opportunity for expansion as Square. And it too has a hefty valuation, along with a continuing bear raid from short seller Citron Research.

But I’ve remained bullish on SHOP stock — and here, too, a recent pullback presents a buying opportunity. Shopify is dominant in its market of offering turnkey e-commerce services to small businesses. That’s exactly where consumer preferences are headed: small and unique over large and bland. And because of offerings like Shopify (and Amazon Web Services), those small to mid-sized businesses can compete with the giants.

Meanwhile, Shopify does have the potential to expand its reach. Just 29% of revenue comes from overseas, a proportion that should grow over time. It’s moving toward capturing larger customers as well through its “Plus” program, picking up Ford Motor Company (NYSE:F) as one key client. The development of an ecosystem for suppliers and the addition of new technologies (like virtual reality) give Shopify the ability to offer more value to customers — and to take more revenue for itself.

Like SQ, SHOP is dearly priced. But both companies have an opportunity to grow into their valuations. And given long runways for Shopify’s adjacent markets, it should keep a high multiple for some to come. As a stock, if not quite as a company, SHOP has a real chance to follow the AMZN formula for long-term upside.

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5 Stocks That Could Be the Next Amazon Stock: Roku (ROKU) 5 Stocks That Could Be the Next Amazon Stock: Roku (ROKU)Source: Shutterstock

Roku Inc (NASDAQ:ROKU) might have the best chance of any company in the U.S. market to follow Amazon’s strategic playbook. The ROKU stock price is a concern: I wasn’t thrilled about the price after a huge post-earnings gain back in November, and even near a five-month low ROKU isn’t close to cheap.

But — perhaps even moreso than Square — Roku now isn’t what Roku is going to be in ten years. The hardware business is a loss leader, but one that allows Roku to serve as the gateway to content for millions of customers. As the company pointed out after Q4 earnings, it’s already the third-largest distributor of content in the U.S. The Roku Channel is seeing increasing viewership. The company offers pinpoint targeting of advertisements — without the messy data problems afflicting Facebook, Inc. (NASDAQ:FB).

Roku is becoming increasingly embedded in TVs, though a deal between Amazon and Best Buy Co (NYSE:BBY) raised some fears about those software efforts going forward. It has a plan to roll out home entertainment offerings like speakers and soundbars, creating a long-sought integrated experience. It could even, as it grows, look to develop or acquire content itself, positioning Roku not as just a conduit to Netflix, Inc. (NASDAQ:NFLX) but a rival.

The bull case for Roku stock is that its players are like Amazon’s books — a way to garner customers and get a foot in the door of the exceedingly valuable media business. What Roku does now that it has entered will determine the fact of ROKU stock. But the amount of options and a reasonable valuation (Roku’s market cap is barely $3 billion) mean that betting on its strategy could be a lucrative play.

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5 Stocks That Could Be the Next Amazon Stock: Nvidia NVIDIA Corporation Stock (NVDA) Won't Stay Down Long After Shocking Analysts Source: Shutterstock

In the context of the stocks chosen here, Nvidia Corporation (NASDAQ:NVDA) doesn’t seem particularly expensive. But in the context of the traditionally cyclical — and low-multiple — semiconductor space, a ~34x multiple to 2018 consensus EPS estimates, even backing out net cash, is awfully pricy.

And with NVDA up a whopping 1,550% in just the past five years, investors would be forgiven for thinking the run might come to an end. Indeed, NVDA stock hasn’t really moved over the past four-plus months.

But the huge amount of secular tailwinds behind Nvidia suggest that the company should be able to drive torrid growth for years to come – and to maintain a multiple that looks rather high on a historical basis. The company’s automotive business gets a fair amount of press, given its potential applications to autonomous driving. But that growth likely won’t come in earnest until the next decade.

It’s the datacenter business that looks most appealing in the near term. Revenue in that category more than doubled in 2017. Thanks to cloud providers like AWS, demand should continue for years to come. And with Nvidia taking share from Intel Corporation (NASDAQ:INTC), its growth should be even better than that of the market. High-end gaming demand should rise, and virtual reality will add another tailwind there.

Unlike, say, Roku (or early-days Amazon), Nvidia’s growth opportunities are mostly known. But at $223, even with a high multiple, they’re not fully priced in. I still see an easy path to $250 for NVDA in the near term. Longer-term, its presence (if not outright dominance) of key markets should lead Nvidia stock to double, at least.

As of this writing, Vince Martin has no positions in any sec

Slowly But Surely, Alibaba Group Holding Ltd Will Feel the Burden of Being a Powerhouse

Over the course of the past few months, at separate times, I’ve argued that sooner or later, time and competition are going to catch up with Amazon.com, Inc. (NASDAQ:AMZN). Though its ever-increasing size allows it to reach deeper into consumers’ pockets in more ways, each of a company’s moving parts makes the whole machine more prone to failure.

It’s a warning that also needs to be passed along to Alibaba Group Holding Ltd (NYSE:BABA) shareholders, particularly in light of some recent developments from its top competitors.

It may not matter right now, or even a few months from now, but other e-commerce and internet companies — frustrated with Alibaba’s dominance — are finally starting to find ways to beat Alibaba at its own game.

Partnerships Are the Key

How does the old saying go? Eventually, every contest becomes a two-horse race?

It’s not a universally true, immutable axiom. There is quite a bit of credibility to the idea, though. The Coca-Cola Co (NYSE:KO) and PepsiCo, Inc. (NASDAQ:PEP) were for all intents and purposes the only relevant soda players when soda was their core product. All other players were either acquired or obliterated.

The same idea more or less applies to AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), which dominate the United States’ telecom scene, leaving the rest of the industry fighting for leftovers and scraps.

Times have changed a bit, though. Now, an outright merger or acquisition is less likely than a formidable partnership intended to take aim at the dominant player in an industry.

Enter SINA Corp (NASDAQ:SINA) and JD.Com Inc (ADR) (NASDAQ:JD). The former operates one of China’s search engines, and the latter is of course China’s second-biggest e-commerce outfit.

The two have teamed up to share information that will ultimately give both parties greater insight about consumer behaviors. Not that Alibaba isn’t armed with plenty of consumer behavior data of its own, but it’s a direct jab at China’s e-commerce powerhouse.

Were it the only team-up of its ilk, it might be able to be dismissed. It’s hardly the only one, though.

Case(s) in point? Late last year, Chinese gaming and app outfit Tencent Holding/ADR (OTCMKTS:TCEHY) partnered up with JD.com and purchased a stake in China’s third-largest e-commerce platform, Vipshop Holdings Ltd – ADR (NYSE:VIPS).

Early this year, JD partnered with Meili in a move that’s intended to woo female shoppers away from Alibaba’s Tmall.

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Then just this month, JD.com made a pitch to European makers of luxury goods, saying it could do a better job of keeping counterfeit goods in check than Alibaba has. And, maybe it can. If nothing else, the sheer size of Alibaba’s Tmall makes it difficult to keep close tabs on every listed item.

These recent developments are, more importantly, a microcosm of the competitive thinking and partnering being done almost exclusively to slow Alibaba down. When the whole world is gunning for you specifically, enough shots will eventually hit the target to create trouble.

To that end, know that Alibaba won’t be stifled by one sweeping blow. It will be nagged into submission by all the nickels and dimes it has to spend to remain the beast it’s become.

Bottom Line for BABA Stock

Don’t read too much into the warning, if you’re asking yourself, “Should I buy Alibaba stock today?” Though it’s something that may adversely impact the Alibaba stock price in 10 years, it’s not going to matter much over the course of the next 10 days, or even the next 10 months. Much can happen in the meantime, and the Alibaba story is still a good one.

You can never afford to assume an organization is perpetually invulnerable, though. Just ask the Eastman Kodak Company (NYSE:KODK) or Xerox Corp (NYSE:XRX), neither of which saw the winds of change blowing in time to do anything about it.

That’s not to suggest any headwind Alibaba could meet will be as dramatic as the plunge into obsolescence that Xerox and Kodak suffered. It is to say, though, that investors need to be very careful about making assumptions. BABA isn’t necessarily the bulletproof name some believe it is.

And for what it’s worth, it’s not like Amazon doesn’t continue to face more and more seemingly innocuous threats as well.

Take for instance how Walmart Inc (NYSE:WMT) and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) got together late last year to develop a voice-activated shopping app for Google’s smart speaker.

Neither company was theoretically the best partner for the other to cocreate the platform. In both cases, Amazon itself was arguably the more potent partner. But neither company feels like continuing to feed its competition. BABA is in that same boat as Amazon.

It’s a small step to be sure, but enough small steps can add up over time.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at

Is Facebook Inc Stock a Screaming Buy or a Portfolio Destroyer?

If I said in January that Facebook Inc (NASDAQ:FB) stock would be trading near $150, many investors would be backing up the truck. After all, it’s the premiere platform for advertising — who wouldn’t want to buy Facebook stock?

It’s easy to ask for a pullback in certain stocks or the market as a whole. But when you see the S&P 500 down 10% in 10 days like we witnessed in February or are staring at FB stock down 20% from its highs, pulling the “buy trigger” becomes a whole lot harder.

In that regard, is it time to buy FB stock?

I’m going out on a limb to say yes, it’s time to start a position. Whether you’ve been long since its $38 IPO and were looking for a pullback to buy or have been contemplating a fresh position in the social media juggernaut, 20% declines in Facebook stock don’t come around too often.

The fear with these types of situations is: How low will the pullback in Facebook stock last?

Sizing Up Facebook Stock

Facebook’s user data issue is a bad one. It’s drawing boycotts and advertiser pushback, while causing users to question the morals of the company. It’s got CEO Mark Zuckerberg heading to Capitol Hill to testify and it raises concern about potential regulations in this space.

It also raises questions about Twitter Inc (NYSE:TWTR) and Snap Inc (NYSE:SNAP). Some have reported that both Twitter and Snap have engaged in similar data-selling practices that Facebook has. Are they next to get significantly hit?

Perhaps, but so far the social media leader has been hit the hardest. At best, FB stock would have been looking at 5% decline. At worst, it will get pummeled like Chipotle Mexican Grill, Inc. (NYSE:CMG). But that would require a decline of more than 66% or in Facebook’s case, a fall to $68. I can’t imagine a scenario where that plays out.

But what about a 30% fall to $136.50? Is a 40% decline to $117 in the cards?

Only because FB stock has fallen 20%, does a decline of 30% seem possible.

In the short-term, it’s hard to imagine much more pain. What we need to see is the business impact. Facebook still connects 2 billion people per month. It still has impressive daily and monthly active user growth. And ultimately, it still has impressive ad, revenue and earnings growth. If these metrics take a hit, that’s how Facebook stock could see major declines this year.

Trading FB Stock

There’s no way to put it nicely: the charts are not good. Now below the 50-day, 100-day and 200-day moving averages, the stock’s vital uptrend has been shattered. Seeing it below $155, what seems to be a notable support level, is also discouraging. While shares bounced Thursday, it’s no guarantee it will last beyond end-of-quarter trading.

Further, we’ve got the 50-day now below the 100-day, showing that intermediate trends are no longer bullish. If the 50-day moving average crosses below the 200-day, it will form what’s known as a “death cross,” a bearish technical setup. It shows that the longer term trend is no longer bullish.

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So why the heck would we want to buy this thing? Buying FB stock is ultimately a bet that it’s business will not suffer catastrophic consequences. It will suffer to some degree, but this doesn’t change the fact that the Facebook platforms are the best way for advertisers to reach customers.

I wouldn’t go all-in on Facebook stock yet. But nibbling a starter position now for a longer-term investment is a bet that FB is still relevant in 6 months, 12 months and 24 months.

Valuing Facebook

Estimates still call for earnings to grow 36% this year and 21% in 2019. Revenue estimates call for 35.8% and 27% growth this year and next. Shares trade at just 17.2 times 2019 earnings estimates. Even if we haircut this year’s earnings estimates of $7.35 per share by 20% (down to $5.88) and cut 2019 estimates by 10% down to $8.01 per share, FB stock still only trades at 19 times 2019 estimates.

On an earnings basis, it’s still cheaper than SNAP, TWTR and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG). Heck, it’s even cheaper than The Coca-Cola Co (NYSE:KO) and has a valuation in line with Procter & Gamble Co (NYSE:PG).

For a company with this fat of margins — ~50% operating margins, ~40% profit margins — and this strong of growth, sub-20 times forward estimates is a good price for longer term investors.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did held a long position in GOOGL. 

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Why Baidu Inc (ADR) Stock Could See a 20% Rally

Shares of Baidu Inc (ADR) (NASDAQ:BIDU) have been struggling since its late-October earnings report. While Baidu beat on earnings per share estimates, it came up short of revenue expectations. So what should we make of the BIDU stock price being down almost 13% from its highs?

What Was So Bad About Earnings?

The BIDU stock price fell almost 8% in one day following earnings. How bad could it have been? The revenue miss was slight, but guidance came up really short. Management’s forecast for fourth-quarter revenue of $3.34 billion to $3.52 billion was below consensus estimates looking for $3.73 billion in sales.

Could this be a positive though? I think Baidu’s sales estimates came up short because it sold off its takeout and mobile games businesses. Management’s guidance calls for 22% to 29% growth, vs. expectations for ~35%. However, excluding its “disposed businesses,” revenue growth would be roughly 28% to 34%, management says. This is still short of analysts’ expectations, but not by nearly as much.

Underlying metrics are accelerating, and Baidu’s profitability is increasing, too. Operating margins jumped 1,100 basis points in the quarter as operating income jumped 69% year-over-year. Revenue per user soared 31% as the use of AI is helping enable customer growth for Baidu. Many call Baidu the “Chinese Google,” the latter of which is a unit of Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG).

Sales are still forecast to grow more than 20% this year and next. Earnings (uncharacteristically) should jump about 60% this year and grow just 4% in the following year. But beyond that, analysts expect 25% growth. As a result, the BIDU stock price trades at just 26.2 times 2017 earnings. That makes it look a lot cheaper than its ~42 times 2016 earnings valuation.

On a trailing basis, BIDU stock looks expensive, and that could be one overhang, even though it shouldn’t be considering its forward valuation. The same could be said for a number of growth companies, including Alphabet, Alibaba Group Holding Ltd (NYSE:BABA) and Facebook Inc (NASDAQ:FB).

Trading BIDU Stock

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Most recently, the company reported that Single’s Day revenue jumped 120% YOY. While Baidu didn’t break out the actual revenue numbers, this was an encouraging bit of news. Ultimately, Baidu is doing a lot of great things, and we’ve seen how powerful search is as a business. It makes me feel that the pullback in BIDU stock is overdone. Fortunately, BIDU stock has given us previous levels to trade against.

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Looking at Baidu’s chart, we can see that BIDU stock has solid support at $230. Shares briefly traded below this level before reversing and finishing near $235. That only validated this level as support in my eyes. Since then, BIDU stock has been on the rise. Currently near $240, it’s unclear if this level will act as short-term resistance or support. I expect $250 to act as resistance in the short term, which also served as a major top several years ago.

However, should the BIDU stock price push above $250, it should make a run at its previous highs near $275. That would be a rally of nearly 20% from its recent lows. While the potential rally won’t happen in a straight line, Baidu has the fundamentals to drive its stock higher.

The MACD measures momentum (blue circle), and BIDU is on the verge of turning bullish. The Relative Strength Index (RSI) measures how overbought or oversold a stock is (yellow circle). BIDU stock has quite a ways to the upside before it shows any signs of being overbought.

Bottom Line on Baidu

Admittedly, Baidu did have some issues, and its stock paid the price. But now its business is going strong, and its operating results continue to expand. Margins and profitability are going higher, and revenue growth remains strong. Its forward valuation is reasonable in my eyes, given the size, strength and digital trends in Asia.

For that reason, so long as the BIDU stock price stays above $230, investors can stay long the stock. Should $230 fail, short-term investors can cut their losses. $210 to $215 would be the next level to consider buying, but we would first need to see what circumstances sent BIDU below $230. Until then, stay long and/or consider a new position between $230 and $240.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.