Investors often seek established winners for their portfolios, even when prioritizing growth stocks, as reliability can coexist with growth potential. Amazon (NASDAQ: AMZN) and Disney (NYSE: DIS) are prime examples of such industry leaders experiencing notable momentum this year. Which of these giants presents the stronger investment opportunity at present?
The case for Amazon: The dominant player in two high-growth businesses
Amazon’s dominance in the e-commerce realm is undeniable, commanding nearly 38% of the U.S. market share, leaving competitors like Walmart trailing far behind at 6.4%. This substantial lead serves as a formidable barrier to entry, solidifying Amazon’s position as the go-to destination for online shopping essentials and beyond. Moreover, with e-commerce outpacing overall retail growth, Amazon is strategically positioned to further fortify its market dominance.
In the realm of cloud solutions, Amazon Web Services (AWS) holds a commanding 31% market share, followed by Microsoft’s Azure at 24%. Although the lead isn’t as impenetrable as in e-commerce, Amazon is actively bolstering its position through aggressive initiatives like the development of generative artificial intelligence (AI) services. These innovations have the potential to revolutionize client experiences, such as AI-powered tools for coding, image creation, and marketing campaigns. With a robust pipeline of new deals, AWS is poised for accelerated growth in the near future.
Additionally, Amazon’s advertising arm, while accounting for less than 9% of sales, serves as a high-margin growth engine, witnessing a remarkable 27% year-over-year increase in the fourth quarter. Much like AWS, this lean and service-oriented business segment contributes significantly to Amazon’s expanding operating income.
Furthermore, Amazon’s ventures into streaming services and healthcare showcase its commitment to diversification and innovation. With a burgeoning presence in these sectors, Amazon is poised to introduce transformative offerings, potentially reshaping entire industries.
These are just glimpses into Amazon’s multifaceted operations, promising a wealth of opportunities as the company continues its forward trajectory.
The case for Disney: All of its parts are working together again
Disney’s expansive operations revolve primarily around the entertainment industry, boasting iconic theme parks, blockbuster films, and a formidable presence in content distribution via linear networks and streaming platforms.
With 12 global theme parks and additional experiences like cruises and resorts, Disney’s destination parks continue to witness surging demand, supported by multiple price hikes in recent years. Revenue from parks surged by 7% year-over-year in the fiscal first quarter of 2024, with Disney investing a substantial $60 billion in park enhancements to broaden the spectrum of physical experiences for visitors.
In a recent organizational restructuring, Disney consolidated all media and networks operations under the “entertainment” segment. Despite a 7% sales dip in this segment, primarily attributed to cord-cutting and pressures on ad-based networks, Disney’s streaming endeavors, particularly Disney+, are inching towards profitability. The streaming operating loss notably narrowed from $984 million to $138 million in the first quarter, with CEO Bob Iger affirming expectations of turning a profit by year-end.
Bolstered by an unrivaled film and content creation ecosystem, Disney consistently dominates the box office with multiple top-grossing films annually. Its rich repository of sequels, franchise-based films, and new character developments fosters a cycle of creative magic, fueling loyalty, fanbase expansion, and lucrative opportunities.
Disney’s strategic initiatives extend to transforming ESPN into an enhanced sports experience and collaborating with Warner Bros. Discovery and Fox to launch a comprehensive sports network alongside additional services like e-commerce and betting.
With promising prospects on the horizon, 2024 holds significant potential for Disney shareholders, possibly marking the year when Disney stock attains historic highs.
Two amazing stocks to choose from
Disney’s stock has surged by an impressive 32% this year, while Amazon’s has seen a still-respectable increase of 20%. Starting the year with ground to cover, Disney has made significant strides, especially considering its recent struggles compared to Amazon’s consistent growth trajectory.
Both stocks hold promise for rewarding shareholders in the coming years. Disney stands to see explosive growth as its streaming services become profitable and its broader business rebounds. However, Amazon enjoys a stronger set of overall tailwinds.
Despite its potential, Disney comes with added volatility as it navigates the transition to a new CEO within the next two years following Bob Iger’s departure. Taking into account these factors, today’s verdict leans towards Amazon as the superior investment choice.
