My favourite US growth stock’s up 33% this year. I think it’s just getting started

Edward Sheldon’s taken a large position in this well-known S&P 500 growth stock. And so far, it’s working very well for him.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Amazon‘s (NASDAQ: AMZN) the largest holding in my portfolio right now. So it’s fair to say that I’m bullish on the US growth stock.

This year it’s done really well, rising about 33%. However, I see room for more share price gains from here – I reckon the stock’s just getting started.

Created with Highcharts 11.4.3Amazon PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Why I’ve gone all in on Amazon

I’ve been banging on about Amazon for a while now. And it looks like my investment thesis is finally playing out. Recently, the stock hit new all-time highs. And over the last month, it’s outperformed other ‘Magnificent 7’ stocks such as Nvidia, Microsoft, Meta, and Apple.

Should you invest £1,000 in Gsk right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Gsk made the list?

See the 6 stocks

I’ve been bullish for a number of reasons. One is that profits are sky-rocketing thanks to a major efficiency drive by CEO Andy Jassy. This year, Amazon’s earnings per share are expected to rise a whopping 77%. Among the Mag 7, only Nvidia has a higher earnings growth forecast.

Another is that there are several factors that should boost Amazon’s profit margins in the years ahead. These include the company’s move into digital advertising (a high-margin business), more third-party sellers on its e-commerce platform (these sellers are more profitable for the company), and the growth of its very profitable cloud computing division, AWS.

A third reason I’m bullish is that, relative to the other Mag 7 stocks, Amazon’s under-owned. Today, just about every fund manager on the planet has positions in the likes of Apple, Microsoft, and Alphabet (Google). Amazon however is far less popular. This means there’s room for more buyers to come in.

Finally, the stock’s valuation is near historical lows. Currently, the price-to-earnings (P/E) ratio using the 2025 earnings forecast is just 33 (not so long ago it was near 300). That’s a high earnings multiple by UK standards. But given this company offers exposure to artificial intelligence (AI), cloud computing, self-driving cars, and more, I think it’s quite reasonable.

$250 in 2025?

Looking ahead, I expect the Amazon share price to continue climbing. And it seems that the analyst community shares my view. This month, more than 20 brokers have raised their share price targets for the stock. Several, including Citi, Truist Securities, Wedbush, and JP Morgan have targets of $250 or higher.

I reckon $250’s achievable in 2025. Looking further out though, I see no reason why this stock couldn’t go on to hit $300 or $400 in the years ahead, assuming its earnings continue to rise.

Of course, there are plenty of factors that could change the trajectory here and result in share price weakness. Higher-than-expected capital expenditures are one. In the coming years, Amazon’s going to have to spend heavily on AI, so this scenario can’t be ruled out.

Competition from Chinese rivals in e-commerce and Big Tech firms in cloud computing and digital advertising are other key risks to consider. This could result in lower-than-expected growth and profitability (note that Amazon just launched its ‘Haul’ service to compete with Temu).

I’m pretty excited about the potential here though. I’m backing this stock to generate strong returns for my portfolio over the next five to 10 years.

Should you buy Gsk now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has positions in Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool UK has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on US Stock

Investing Articles

Down 41% in months, is Tesla stock overvalued or undervalued?

After Tesla stock has lost over two-fifths of its value in under three months, is it looking like a bargain?…

Read more »

Investing Articles

Here’s how Warren Buffett’s 2024 letter to shareholders can teach us to be better investors

The latest 2024 letter from Warren Buffett is a bit shorter than previous ones, but it's still packed with words…

Read more »

Investing Articles

What on earth is going on with the Nvidia share price lately?

The Nvidia share price has been all over the place in February. Does this tempt our writer to add the…

Read more »

artificial intelligence investing algorithms
Investing Articles

Should I buy Palantir stock for my ISA after its 32% crash?

The Palantir share price has bombed over the past week or so, leaving this writer wondering if now's the time…

Read more »

artificial intelligence investing algorithms
Investing Articles

Here’s how DeepSeek could be great news for the Nvidia stock price

Nvidia stock is still depressed even after a cracking set of fourth-quarter results. But could DeepSeek AI be a boon,…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

How much further can the Tesla stock price fall?

Tesla stock soared late last year, and now it's slumping. Which way will the winds be blowing by the end…

Read more »

US Stock

Tesla stock is down 26% in a month. What on earth is going on?

Jon Smith talks through three key reasons why Tesla stock has fallen in recent weeks, but explains why investors should…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Down 99%! This $1 penny share has been crushed by the artificial intelligence (AI) boom

Our writer takes a look at one penny share that has been crushed like a tin can since the release…

Read more »