Costco (NASDAQ: COST) has become an impressive retail stock, posting 221% growth over the past five years. This type of growth is typically reserved for tech stocks and is outperforming its competitors. Walmart And Target. Costco’s wholesale and annual membership businesses saw revenue jump 59% during the same period. At the same time, the company has enormous growth potential through its overseas expansion.
However, just because a company’s business is booming doesn’t necessarily mean it’s a good time to buy its shares. While recent growth has benefited Costco’s current investors, it has also raised the price of entry for new investors and caused its stock value to fall.
This chart uses two key valuation metrics to show that two other retailers, Amazon (NASDAQ: AMZN) And Apple (NASDAQ:AAPL), offer much more value to investors than Costco. Amazon and Apple’s metrics aren’t exactly bargains on their stock, but they offer more bang for your buck than Costco, making them worth considering over the warehouse retailer.
So, forget Costco and consider buying one of these unstoppable stocks instead.
1. Amazon
Amazon has become a retail giant, responsible for 38% of sales. the e-commerce market. For reference, Walmart has the second largest market share at just 6%. Amazon’s reach is so vast that it is dominating markets it never intended to dominate. For example, the online retailer is responsible for 44% of all video game purchases in the United States, surpassing even GameStop and the Apple App Store.
Amazon’s success over the years has given it the financial resources to diversify its business. In addition to e-commerce, the company has become a major player in cloud computing, artificial intelligence (AI)video streaming and digital advertising. These markets are growing rapidly, allowing Amazon to rely less on product sales 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 and gives it a promising role in AI. Enterprises are increasingly turning to cloud services to integrate AI into their workflows. Meanwhile, AWS is the world’s largest cloud platform.
In the first quarter of 2024, AWS reported revenue growth of 17% year-over-year, while its operating profit nearly doubled to over $9 billion (or 60% of profit total operating income of Amazon).
Over the past year, Amazon’s business has exploded, driving its free cash flow up more than 1,000%. The company is on a growth trajectory that’s too good to pass up, with its stock a better buy than Costco this month.
2. Apple
Like Costco and Amazon, Apple has managed to build customer loyalty over the years. The company is a leader in the consumer technology market thanks to the popularity of its products. Its dominance in the sector is mainly due to its third largest market share in the e-commerce sector, which it achieved despite having a significantly smaller product range than that of the sector leaders (Amazon and Walmart).
Apple has faced headwinds over the past year as declining product sales have concerned investors and seen its price rise just 12% over the past 12 months. This figure is less than half that S&P 500′its increased 26% over the same period, even though 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 term. The company reached $102 billion in free cash flow last year, more than competitors like Microsoft, Alphabet, or even Amazon. The figure indicates that Apple has the funds to continue investing in its business and overcome current headwinds.
In 2024, the tech giant has expanded into two booming 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 cheaper version that will be more accessible to the average consumer. Meanwhile, the company is investing in AI, announcing Apple Intelligence earlier this month. The AI ​​platform will bring generative features to its product lineup and could boost sales as consumers upgrade their devices to access Apple Intelligence.
Apple is a no-brainer for anyone looking for an alternative to Costco stock and could generate significant gains by expanding its product line in the years to come. And that’s not counting promising positions in digital services and fintech, which could further drive profit 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, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Daniel Cook has no position in any of the stocks mentioned. The Motley Fool has 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 on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Forget Costco: These Unstoppable Stocks Are Better Buys was originally published by The Motley Fool
