Amazon (NASDAQ: AMZN) is that stock that many investors kick themselves over for having not bought the stock from the get go.
The stock has returned well over 100,000% since its IPO in 1997. A big part of those returns have come from Amazon having vastly expanded the reach of its business.
What was once an online bookseller, is now everything from an e-commerce giant, to a grocer, to cloud computing, to online media. Amazon has even jumped into the healthcare market with its buyout of PillPack, and partnership with Berkshire Hathaway (NYSE: BRK.A, BRK.B) and JPMorgan (NYSE: JPM). And its pushing into the logistics market and may even break into the wealth management market.
The company has also managed to maintain growth stock status for more than two decades. And while its valuation might seem lofty, the market has assigned such a substantial premium to the stock for more than 20 years, and there’s no sign that’s changing any time soon.
It’s impressive to be sure, and it’s a path that most companies can’t duplicate. But there are a few stocks that have the potential to replicate parts of the Amazon template.
While I can’t say that any of these stocks will deliver 100,000% returns, these three stocks do have the potential to deliver strong long-term gains.
Here’s what you need to know about these three stocks.
JD.com (NASDAQ: JD)
While Alibaba (NYSE: BABA) gets more attention, JD.com (NASDAQ: JD) is the closest thing to Amazon in China.
Much like Amazon, JD carries inventory and is investing in a cutting-edge supply chain. It is also expanding into a grocery chain, partnering with Walmart (NYSE: WMT) to expand its off-line ambitions, and is even entering the finance industry, which Amazon has hinted it is doing.
JD had a rough year last year and is down -52.5% in the last twelve months, and nearly all of that was in the last half of the year. There are a number of culprits that weighed the stock down, including the U.S. and China trade war, slowing profit growth, and the shocking arrest of JD’s CEO, Richard Liu, on a rape allegation in Minnesota in September.
But this is a comeback to watch in 2019.
In December, law enforcement officials announced that they would not be prosecuting Liu, which lifted a cloud that had hung over the stock for months.
And while a slowing Chinese economy could continue to impact the stock, JD’s profit growth is expected to rebound as the company has been investing heavily in a warehouse expansion where it has added more than one new warehouse every two days for the past four consecutive quarters. That investment will likely pay off this year, and analysts anticipate JD’s earnings will more than double to $0.55.
But even if growth in the country slows, the Chinese e-commerce market is still a massive long-term growth opportunity. And that’s evident by the 25% increase in revenue JD saw in its most recent quarter, with revenue from its higher-margin services segment up 49%.
So far this year, shares are up nearly 6%, but the stock could see enormous upside once investor confidence returns.The long-term strategy looks intact, and the company is the closest thing to Amazon in one of the world’s fastest growing markets.
The average analyst price target for JD is $33.56, suggesting possible upside of 51.59% over the next twelve months. Last month, MKM Partners issued a Buy rating on the stock and set their price target at $35 – 58% higher than Thursday’s closing price.
Square (NYSE: SQ)
At over 90x forward earnings, one has to wonder if the growth with Square (NYSE: SQ) is already priced in. But Amazon had its skeptics as well, and valuation aside, Square could very well follow an Amazon-like expansion with its business.
Amazon used books to expand into e-commerce and then used e-commerce to break into several other areas, and Square has the ability to expand well beyond its current payment-processing base.
Square’s users are predominantly small businesses, a space that is ripe for disruption. Square already offers web hosting and small business loans through its Square Capital, and is now integrating tools that reach into payroll, HR, and other business offerings which dramatically expands the company’s addressable market, and could lead to a decade or more of incredible growth.
“Similar to FANG stocks that have disrupted traditional markets with massive global total addressable markets, Square’s fully cohesive solutions and rapid rate of innovation suggest that it is en route to disrupt the global payments ecosystem,” wrote Nomura analyst Dan Dolev in a note titled, “Adding the ’S’ to FANG(S).”
Analysts’ average twelve month price target for SQ is $85.24, indicating potential upside of nearly 24%. Earlier this month, Nomura reiterated its Buy rating on the stock and boosted its price target to $108 – 57% higher than today’s closing price.
Nvidia (NASDAQ: NVDA)
You might be surprised to see Nvidia (NASDAQ: NVDA) on this list. But the company could see growth in many of the burgeoning markets of the future.
The once high-flying chipmaker saw more than half of its value get wiped out in the last half of 2018 thanks to the major market sell-off in October that disproportionately punished highly-valued tech stocks, especially semiconductors on fears of slowing demand, as well as the escalating trade war with China, and disappointing third and fourth quarter results that the company’s CEO, Jensen Huang, said was due to a “cryptocurrency hangover.”
But the market seems to be forgetting that this is a massively profitable company that is working toward diversifying its revenue streams.
Nvidia is in an industry-leading position in not just the gaming market, but also in the datacenter, automotive, and AI sectors as well. And recent numbers suggest that there is zero slowdown in those sectors given the secular shifts toward data-driven decision making and automated technologies.
Once Nvidia clears out its excess inventory and resumes year-over-year growth, the narrative is likely to refocus on the company’s long-term growth drivers, which remain impressively strong.
25 Wall Street analysts rate NVDA a Buy and their average price target for the stock is $250.26, suggesting possible upside of 64.95% over the next twelve months. Early this week, Evercore ISI reiterated its Outperform rating on the stock and set their price target at $275 – 81.25% above the current price.