The S&P 500 (SNPINDEX: ^GSPC) is on the cusp of bull market territory, just 6 percentage points away. This suggests more significant gains are on the horizon. Investors looking to capitalize on this should consider adding funds to the market now, particularly focusing on stocks that have historically outperformed.
Two companies that fit this bill are Shopify and Monster Beverage. Both have seen their share prices appreciate so significantly that they opted to split their stocks. Each has a competitive edge that could fuel continued outperformance, making them particularly attractive investments, especially in light of the impending bull market.
Shopify offers a comprehensive solution for retail businesses. It provides software that enables merchants to manage both their physical and digital storefronts from one dashboard. Additionally, Shopify offers a range of services such as payment processing, logistics support, and expense management. This all-in-one approach has solidified Shopify’s strong market presence.
Shopify has been recognized as a leader in digital commerce platforms by consultancy Gartner, which highlighted its robust portfolio and rapid innovation. Research company G2 also acknowledged Shopify’s leadership in e-commerce and omnichannel commerce software. With over 10% market share in U.S. online retail sales, Shopify is the second-largest domestic e-commerce company, trailing only Amazon.
In the third quarter, Shopify’s revenue increased 25% year over year to $1.7 billion, driven by strength in subscription software and merchant services. Net income under generally accepted accounting principles (GAAP) improved to $718 million, up from a loss of $159 million in the prior year. This return to profitability followed Shopify’s sale of its logistics business to Flexport, which now serves as a logistics partner to Shopify merchants.
Shopify also launched new products and features in the third quarter, including Shopify Markets Pro, a high-end cross-border commerce solution. Furthermore, Shopify reached an agreement with Amazon to allow Shopify merchants to offer “Buy with Prime,” extending the benefits of the Prime membership program beyond the Amazon marketplace.
With retail e-commerce sales projected to increase at 10% annually through 2032, Shopify is expected to grow even more rapidly due to its strong market presence. Morgan Stanley anticipates revenue growth of 19% annually over the next decade for Shopify. This makes its current valuation of 13.2 times sales appear reasonable, especially considering the three-year average is 25.2 times sales.
Monster Beverage, known for its energy drinks sold under several brands, also has a growing alcoholic beverages business. This was initiated by its 2022 acquisition of CANarchy, a craft beer and hard seltzer company, and further expanded with its 2023 launch of The Beast Unleashed, a line of flavored malt beverages.
Monster’s brand authority and distribution reach set it apart. Its effective marketing and regular product innovation keep its products at the forefront of consumers’ minds. Moreover, its exclusive partnership with Coca-Cola gives Monster unique access to the world’s largest beverage bottling and distribution system.
These factors have propelled Monster to the top of the energy drink industry. While Red Bull is the most popular single brand, Monster Beverage leads the market across all brands in the U.S., Japan, South Korea, and several Latin American countries.
In the third quarter, Monster reported strong financial results, with revenue increasing 14% year over year to $1.9 billion. This was driven by solid growth in the energy drinks and alcoholic beverages segments. Gross profit margin expanded 170 basis points to 53% due to price increases and expense control efforts, and GAAP net income surged 40% to $453 million.
The global energy drinks market is expected to grow at 8.3% annually through 2030. However, Monster could grow slightly faster due to its brand authority, distribution reach, and expansion into alcoholic beverages. Given this, its valuation of 8.3 times sales seems reasonable, especially as it falls below the three-year average of 9 times sales. This makes Monster Beverage a stock worth buying.
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