Chances are that most of you reading this have purchased something on Amazon.com at one point or another. What started out as an online bookstore during the famous dotcom era, grew to be the second company ever to reach the trillion dollar market cap, and is now often referred to as “The Everything Store.” Amazon was founded in 1995, became publicly traded in 1997, and as of 2018 did $232.89 billion in sales.
Had you been an early investor in Amazon back in 1997, your total return on investment would be approximately 96,446.43%, or an average annual compounded growth rate of 136.47% as of this writing (adjusted for stock splits and dividends). Sounds like a return on investment you could live with!
The Next “Amazon Success Story”
Thousands of new companies startup every day just like Amazon back in 1995, and hundreds of those companies become publicly traded each year. By looking for companies with similar growth characteristics as Amazon, a little bit of fundamental analysis and maybe a pinch of speculation concerning the future, we may just be among the few investors turned wealthy from a great stock pick.
Aside from looking at the company’s balance sheet, sales growth and market share, three common denominators always seem to be fundamental characteristics of industry disrupting companies such as Amazon (of course, hindsight is 20/20). They are:
Does the company solve a growing problem, market need, or market trend?
Does the respective company’s market trend indicates a growing market opportunity for the company?
Does the company have a competitive advantage, first mover advantage, or clear “moat” within its market?
Check out our piece on 3 Amazon-Proof Retailers.
Here are 3 stocks that I believe have great potential to become the next “Amazon-Success Story” and carry all 3 characteristics indicated above with major growth numbers.
Roku provides a streaming TV platform allowing users to stream media to their TV from multiple streaming media apps such as Netflix, Hulu, Amazon Prime Video, and many more.
What problem or market need does Roku solve? Streaming media is provided through internet access, and media content is presented by companies to the viewing consumers in the form of an app, such as Netflix (for example). Currently, consumers on average subscribe to three video streaming services. With announcements of major media companies to produce their own “Netflix”-like app such as Disney Plus, consumers have a growing demand to access of all their favorite tv media subscriptions in one location, and Roku provides a cost effective & universal solution to this demand.
Check out 3 Threats to the Dominance of Netflix.
What’s more, is that according to Deloitte’s 13th edition of its annual Digital Media Trends survey, 47% of consumers say they are frustrated by the growing number of subscriptions and services required to watch what they want.
Currently, Roku accounts for more than 30% of U.S. sales of connected TV devices according to a Q1 of 2019 research report. In terms of devices in use, Roku has a 36% lead over the next major streaming platform, Sony Playstation, and is expected to stretch to 70% by the end of the year.
As more and more companies build their own streaming media subscription channels, their top sales avenue with access to consumers will be the Roku streaming media device, a strong industry moat in and of itself. Furthermore, Roku’s partnership with major TV manufacturing companies allows it to reach more customers by embedding the Roku platform into the TV itself, making it a default option for streaming media to new consumer segments.
Square provides both hardware and software for companies to more efficiently run their business. Its products include point of sale hardware and software, invoicing software, payment gateways for online businesses to accept payments, and even payroll services. More recently, Square has invested heavily in expanding its products to now offer capital for businesses in need of loans, peer to peer payments for both consumers and businesses (known as Cash App by Square), and even ecommerce websites (Square owns the website builder Weebly).
Where square stands out among it’s competition is found in its “first mover advantage” of making it easy for entrepreneurs to start accepting payments for their idea turned business with a square device (no pun intended, and hence, the name Square) inserted into the auxiliary input on your smartphone.
Square is on of our 3 Stocks for Cashing in on a Cashless Future.
This moat extends to traditional brick and mortar businesses that are new to online commerce. Square makes the transition of taking an old-fashioned retail store to having a modern digital storefront nearly a seamless process, for both new and well established companies. In short, the problem Square solves, and the industry moat it owns is a service that bridges the gap between small business startups and accepting their first payments, as well as old fashioned retailers and competing with an online presence.
Reports performed by Disruptive Advertising, show that the online trend is only growing exponentially. For example, in 2017, $5 billion was spent online during the 2017 black Friday sales alone. Furthermore, according to a Shopify report, ecommerce sales hit $2.3 trillion in sales in 2017, and is expected to hit $4.5 trillion in 2021. What do these statistics mean? They show that there is a clear indication of a growing trend for startups to be online, and for aged brick and mortar stores to have an online storefront, or risk going out of business.
Is there a growing trend for accepting payments both online and offline, as well as adding your brick and mortar presence to the digital world? Absolutely! And Square is in a prime position to disrupt the industry, with a current valuation at $24.89 billion and growing.
Wix is primarily a website builder that caters to both individuals and businesses of all experience levels. Wix Editor is its “drag and drop” website builder that allows individuals and businesses with no web development experience to create a professional looking website on a drag and drop basis. Wix ADI allows users to literally answer a few questions on the type of website they wish to build, and automatically creates a professional looking website based on the response to your website objectives and industry.
Lastly, Wix Code allows web developers with development experience to code up their own websites from scratch, as well as build web applications and integrations. If some of that jargon is foreign to you, long story short, Wix makes building websites easy and customizable for everyone. What is Wix’s industry moat? Consider Wix the publicly traded, modern version of perhaps the most well known website builder, WordPress (who currently powers more than 30% of websites online), except without the platform learning curve.
Is the online market a growing trend? If the growth of social media platforms (Facebook, Twitter, Pinterest), online resumes (LinkedIn), and eCommerce sales (as discussed previously) isn’t enough evidence, perhaps the fact that 51% of smartphone users discovered a new company or product online while conducting a smartphone search, further illustrates the importance of having an online presence. And this trend is only growing, putting Wix in a secure place to be perhaps a “tenbagger” or even “twentybagger” investment. Wix is currently valued at just over $6 billion dollars, with plenty of room to grow.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Amazon, Roku, Square and Wix. Read our full disclosure policy here.
Cameron Williams is a freelance writer on finance and investment related topics. Read more of Cameron Williams’ work here.
MyWallSt Contributor, Author at MyWallSt Blog
This article was written by one of our MyWallSt freelancers.