Two Long-Term Growth Stocks to Consider: Amazon and Dutch Bros
In a market that's pulling back from recent highs, it's a great time to consider long-term investments in growth stocks, especially in the consumer sector. Here, we highlight two top picks that offer strong growth potential and are worth holding for the foreseeable future.
- Amazon (AMZN)
Amazon is a powerhouse in the e-commerce and cloud computing space, making it an excellent long-term growth stock. The company's dominance in both sectors is undeniable, and it has numerous growth levers at its disposal.
In e-commerce, Amazon has focused on becoming one of the most efficient operators globally. It has invested heavily in logistics and fulfillment centers worldwide, and now it's taking things a step further with robots and artificial intelligence (AI). Amazon employs over a million robots in its warehouses, all coordinated by its DeepFleet large language model. These robots not only move packages but also spot damaged goods before they leave the warehouse. Additionally, AI is being utilized to optimize delivery routes, warehouse storage, and even driver navigation.
The company's AI-powered ad business is also experiencing rapid growth, contributing to strong operating leverage. In Q3, Amazon's North American revenue increased by 11% to $106.3 billion, while its adjusted operating income surged by 28% to $7.3 billion. This growth is further supported by Amazon Web Services (AWS), its cloud computing division, which saw a 20% year-over-year revenue increase to $33 billion in the last quarter. AWS also increased its capital expenditure budget, indicating a strong commitment to capitalizing on emerging opportunities.
Amazon's strategic partnerships with OpenAI and Anthropic further solidify its growth prospects. The company recently signed a seven-year, $38 billion deal with OpenAI to provide EC2 UltraServers with Nvidia GPUs, while Anthropic is leveraging Amazon's custom Trainium chips for Project Rainier. These partnerships position Amazon to benefit from the growing demand for AI-related services.
- Dutch Bros (BROS)
Dutch Bros, a coffee shop operator, is another compelling growth story in the consumer space. Despite the restaurant industry facing consumer fatigue, Dutch Bros has demonstrated resilience with strong same-store sales. The company's innovative menu items, mobile ordering, and expanded advertising have driven this growth. Moreover, the introduction of hot food items has resulted in a 4% comparable sales lift for locations offering these new menu items.
With a long runway of expansion ahead, Dutch Bros plans to open 175 stores next year, up from 160 this year. The company aims to reach 2,029 locations by 2029 and eventually have 7,000 shops in the U.S. Its smaller shop concept, which includes drive-thru lanes and a pickup window, makes expansion relatively cost-effective. Despite the small size of its shops, Dutch Bros generates strong sales, with average unit volumes (AUVs) of nearly $2.1 million.
In summary, both Amazon and Dutch Bros are solid long-term growth stocks. Amazon's dominance in e-commerce and cloud computing, coupled with its strategic partnerships, positions it for continued success. Dutch Bros' strong same-store sales and expansion opportunities make it a compelling choice in the consumer sector. These investments offer the potential for significant returns over the long term.
