One school of thought says that S&P 500 recently entered correction territory, which is typically defined as a 10% drop from a bull market peak. The index arguably fell below that threshold last week, but that view is based on the idea that a new bull market began in June.
Another school of thought says that the S&P 500 never left bear market territory, which is generally defined as a 20% drop from a bull market peak. The index last hit an all-time high on Jan. 3, 2022, and some investors believe it must regain that level before a new bull market begins.
Either way, history makes it clear that the S&P 500 will eventually recover, so investors should treat the current situation as a buying opportunity. Here's why you would buy shares of cloud flare (NET 13.86%) and Amazon (AMZN 0.38%) in an instant today.
1. Cloud Flare
Cloudflare offers a range of cloud services that make corporate applications and infrastructure faster and more secure. Several qualities set the company apart, but two of the most important are engineering prowess and scale. Cloudflare has created the world's fastest cloud network and its platform powers approximately 20% of the Internet.
That scale provides deep insight into performance issues and cyber security threats on the web, and each data point improves your ability to route traffic and prevent attacks. The result of unparalleled speed and deep data advantage is that Cloudflare has earned a leadership position in several cloud verticals, including content delivery network software, web application protection, access to Zero trust network and edge development platforms.
Although economic headwinds remain, Cloudflare still delivered strong financial performance in the second quarter. Their number of customers increased 15% to 174,129, and the average customer spent 15% more. In turn, revenue increased 32% to $308 million and the company reported non-GAAP net income of $34 million, above the prior year's break-even point. Investors have good reason to believe the momentum will continue.
Cloudflare integrates with public clouds and private data centers to provide a unified view of corporate IT environments, but the same can't be said for providers like Amazon Web Services and microsoft Azure. A consequence of its infrastructure-neutral positioning is that Cloudflare has become quite popular among artificial intelligence (AI) newly created. In fact, CEO Matthew Prince believes the company is โuniquely positioned to become a leader in AI inference.โ
In that sense, Cloudflare predicts that its addressable market will exceed $200 billion by 2026, and Morningstar strategists expect the company to grow its revenue by 34% annually over the next five years. That makes its current rating 16.6. times sales That seems reasonable, and that multiple is a real bargain compared to the three-year average of 40.3 sales. That's why this growth stock is a spectacular buy.
2. Amazon
Amazon is the e-commerce leader in North America and Western Europe, and its market share continues to trend upward. Brand authority and an expanding logistics network are the forces behind those share gains. The Amazon brand is synonymous with digital retail, and its ability to support sellers with fulfillment services (and delight shoppers with fast deliveries) strengthens the network effect inherent to its market.
As a retail giant, Amazon has an unparalleled ability to engage consumers and obtain buyer data. That advantage has been a driver of explosive growth for its advertising business. Amazon accounts for 75% of US retail ad spending, 10 times its closest competitor, and recently became the third largest advertising technology company in the world. According to eMarketer, Amazon will continue to gain share in the coming years as market leaders Metaplatforms and AlphabetGoogle continues to move forward.
The third pillar of Amazon's business is cloud computing. Amazon Web Services (AWS) has long been the gold standard in cloud infrastructure and platform services, holding almost as much market share as Microsoft Azure and Alphabet's Google Cloud Platform combined. computer consulting Gartner He attributes that success to AWS having "the greatest breadth and depth of capabilities of any vendor."
Amazon delivered solid third quarter results, beating estimates on the top and bottom lines. Revenue rose 13% to $143 billion thanks to particularly strong growth in retail and advertising, and GAAP net income more than tripled to $9.9 billion. Investors can expect similar results in the foreseeable future.
Amazon has a strong presence in three growing markets. Straits Research says online retail sales will grow 8% annually through 2030, and Grand View Research expects the cloud computing and ad tech markets to expand 14% annually over the same period. Those forecasts point to low double-digit revenue growth for Amazon through the end of the decade.
In that context, its current valuation of 2.5 times sales looks cheap, especially when its three-year average is 3.1 times sales. That's why I'd buy this growth stock in a heartbeat right now.
Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Trevor Jennewine It has positions on Amazon. The Motley Fool ranks and recommends Alphabet, Amazon, Cloudflare, Meta Platforms, and Microsoft. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
