Costco (NASDAQ: COST) has grown an impressive store base, growing 221% over the past five years. That kind of growth is typically reserved for tech stocks, and it’s outperforming the competition Walmart And Goal. Costco’s wholesale and annual membership operations have seen sales increase 59 percent over the same period. Meanwhile, the company has tremendous growth potential as it continues to expand abroad.
However, just because a company’s business is booming doesn’t necessarily mean it’s the right time to buy stock. While the recent growth has benefited current Costco investors, it has also raised the price of entry for new investors and tanked the value of its stock.
This chart uses two key valuation metrics to demonstrate that two fellow retailers, Amazon (NASDAQ: AMZN) And Apple (NASDAQ: AAPL), offering investors significantly more value than Costco. Amazon and Apple’s numbers don’t exactly make their stocks bargains, but they do offer better value than Costco, making them worth considering over the department store retailer.
So forget Costco and consider buying one of these unstoppable stocks instead.
1. Amazon
Amazon has become a retail behemoth, accounting for 38% of the e-commerce market. For reference, Walmart has the second-largest market share at just 6%. Amazon’s reach is so vast that it’s dominating markets it was never meant to. For example, the online retailer accounts for 44% of all video game purchases in the U.S., surpassing even GameStop and Apple’s App Store.
Amazon’s success over the years has given it the financial resources to diversify its businesses. In addition to e-commerce, the company has become a major force in cloud computing, artificial intelligence (AI), video streaming, and digital advertising. These markets are expanding rapidly, allowing Amazon to rely less on selling products and more on digital businesses that offer higher profit margins.
The company’s cloud platform, Amazon Web Services (AWS), has quickly become its most profitable division, giving it a promising role in AI. Businesses are increasingly turning to cloud services to integrate AI into their workflows. AWS is now the world’s largest cloud platform.
In the first quarter of 2024, AWS reported 17% year-over-year revenue growth, while operating income nearly doubled to over $9 billion (or 60% of Amazon’s total operating income).
Over the past year, Amazon’s business has exploded, increasing its free cash flow by more than 1,000%. The company is on a growth trajectory that’s too good to pass up, with its shares a better buy than Costco this month.
2. Apple
Like Costco and Amazon, Apple has built immense brand loyalty among consumers over the years. The company is a leader in the consumer technology market with the popularity of its products. Its dominance in the industry is most strongly tied to its third-largest market share in the e-commerce industry, which it has achieved despite offering a significantly smaller product range than the industry leaders (Amazon and Walmart).
Apple has faced headwinds over the past year as declining product sales have worried investors and its price has risen just 12% over the past 12 months. The figure is less than half of S&P 500′Up 26% over the same period, although the tech giant has a reputation for often outperforming the index.
However, a loyal user base and vast financial resources suggest that Apple will come back strong in the long run. The company generated $102 billion in free cash flow last year, more than its competitors want Microsoft, Alphabetor even Amazon. The figure indicates that Apple has the resources to continue investing in its business and overcome the current headwinds.
In 2024, the tech giant expanded into two emerging sectors: AI and virtual/augmented reality (VR/AR). These markets are expected to grow at compound annual growth rates of 37% and 27% through 2030, illustrating Apple’s enormous potential.
Earlier this year, the company launched its first VR/AR headset with the Vision Pro, and is reportedly working on a lower-cost version that will be more accessible to the average consumer. In the meantime, the company is investing in AI, announcing Apple Intelligence earlier this month. The AI platform will bring generative capabilities to its product lineup and could boost sales as consumers update devices to gain access to Apple Intelligence.
Apple is a no-brainer for anyone looking for an alternative to Costco stock, and could deliver significant gains as it expands its product lineup in the coming years. And that’s before you even consider its promising positions in digital services and fintech, which could further fuel earnings growth.
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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. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Microsoft, Target and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Forget Costco: These Unstoppable Stocks Are Better Bargains was originally published by The Motley Fool
