Stock market volatility will come and go, but what makes a growth stock truly unstoppable is the strength of its underlying business. Whether a stock rises or falls in the short term, if you patiently hold shares of a competitively strong company, you will earn great returns sooner or later.
There are three phenomenal growth stocks to buy right now Amazon (NASDAQ: AMZN), MercadoLibre (NASDAQ: MELI)And Home Depot (NYSE: HD). Here’s what three Motley Fool contributors have to say about these all-star companies.
Amazon’s profitability is piling up
John Ballard (Amazon): Amazon has been a true wealth-building investment for long-term shareholders. Over the past five years, the stock has doubled and still looks strong in 2024.
Amazon is involved in many business opportunities, including e-commerce, digital advertising and cloud computing (e.g. Amazon Web Services or AWS). E-commerce alone is a market worth billions and continues to grow. Last-twelve-month revenue for all these companies grew 12% year over year to $604 billion in the second quarter.
That’s a healthy growth rate for such a large company, which speaks to the substantial opportunities ahead. Integrating artificial intelligence (AI) into the shopping experience could allow Amazon to gain share in the online retail market, especially in apparel. The company is investing significantly in generative AI shopping assistants to make browsing and finding the right items more convenient and easy.
Another reason to view Amazon as an unstoppable growth stock worth owning is its improving bottom line. Amazon is becoming a financial powerhouse, with operating profit nearly doubling year-over-year in the second quarter. Residual free cash flow has more than doubled over the past five years to $48 billion.
As management focuses on cutting costs, improving operational efficiencies, and investing in growth opportunities like AI and cloud services, investors will do very well with Amazon stock in 2025 and for years to come.
Fast growing in multiple companies
Jennifer Saibil (MercadoLibre): MercadoLibre is the largest e-commerce retailer in Latin America and also has a competitive fintech business. The country continues to report high growth and profits despite a volatile Latin American economy and inflation, and as the global economy begins to develop it will be well positioned to benefit even more.
E-commerce is still the company’s main activity and is growing at a robust level. Gross merchandise volume increased 20% year-on-year in the second quarter, or 83% on a currency-neutral basis. E-commerce remains underexplored in Latin America, which is still moving away from a largely cash-based society, leaving MercadoLibre with a long growth runway in this sector alone. It serves a population of more than 500 million people and continues to activate new customers who buy more items and buy more often. Even if this were his only activity, it would be a notable share.
But there is so much more. The fintech sector is growing even faster and offers enormous opportunities. The fintech platform offers digital payments, credit cards and more on a fully digital app. It has a large lending business with approximately 20 million users at a service fee of less than $1. It is an asset-light, cash-rich company, which creates strong financial positions for the entire company.
Like Amazon, MercadoLibre is leveraging its extensive media and advertising e-commerce platform with strong results. The company ranks third in digital advertising market share in its region, with advertising revenue increasing from $436 million to $705 million by 2023.
Total revenue rose 42% year over year (113% currency neutral) to $5.1 billion in the fourth quarter, and net profit rose from $262 million last year to $531 million this year. These are typical growth figures.
MercadoLibre stock surpasses S&P500 up 32% this year, and it could climb much higher as it continues to deliver solid performance.
Take advantage of the housing recovery
Jeremy Bowman (Home Depot): The housing market has been struggling since mortgage rates began rising rapidly in 2022. Home prices remain high, and the lock-in effect of low mortgage rates during the pandemic has deterred Americans from moving.
However, the Federal Reserve recently cut the Fed Funds rate (with further cuts likely), which should lead to lower interest rates, and the housing market is starting to show signs of life. Redfin reported that mortgage interest rates rose 70% from a month ago following the Fed’s 50 basis point rate cut, and mortgage purchase applications also rose 10%.
Meanwhile, Americans have record levels of home equity that they are eager to tap for home improvement projects.
These trends are all good news for Home Depot, the nation’s largest home improvement retailer. Home Depot’s performance has been sluggish while the housing market has been sluggish, but should recover during the recovery, especially since there is a shortage of millions of homes in the country.
Both presidential candidates have plans to address the housing shortage with proposals that will make it easier to build new homes and make homeownership more accessible, favoring home improvement stores like Home Depot.
In addition, Home Depot is well positioned to benefit from the recovery following its acquisition earlier this year of SRS Distribution, a leading building materials distributor that has expanded its addressable market by $50 billion and strengthened its relationship with the professional customer.
Home Depot stock may not look like a bargain right now, as it trades at a price-to-earnings ratio of 27, but there’s a lot of leverage in the business model. Once growth returns, earnings could be significantly higher, making the stock a winner in 2025.
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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. Jennifer Saibil holds positions in MercadoLibre. Jeremy Bowman has positions in Amazon, MercadoLibre and Redfin. John Ballard has positions in MercadoLibre. The Motley Fool holds and recommends positions in Amazon, Home Depot, MercadoLibre, and Redfin. The Motley Fool recommends the following options: November 2024 short call at $13 on Redfin. The Motley Fool has a disclosure policy.
3 Unstoppable Growth Stocks You Need to Buy Before 2025 was originally published by The Motley Fool
