Wall Street doesn’t like uncertainty, and there is plenty of it right now. Concerns over the impact of tariffs on the economy have sent shares of even the strongest companies well off their highs this year. For investors with a long-term perspective, the recent pullback is a great opportunity to buy shares of industry-leading companies at lower valuations that can set up excellent returns.
To give you some ideas, read why three Fool.com contributors believe Amazon (AMZN -0.20%), Deckers Outdoor (DECK 5.24%), and Shopify (SHOP 2.34%) could grow the value of your investment portfolio for potentially decades.
Amazon looks unstoppable on multiple fronts
John Ballard (Amazon): Amazon has delivered enormous shareholder wealth over the last few decades, yet the business is still getting stronger. The stock’s recent dip has brought its valuation down to multiyear lows that may undervalue its future growth.
Amazon isn’t going anywhere. It has more than 600 million square feet of warehouse space and data centers that enabled it to dominate the e-commerce market. It has built multiple revenue streams across online retail, advertising services, cloud computing, subscriptions, and third-party fulfillment services that can fuel profitable growth for a long time.
Advertising and cloud services continue to look like monster opportunities for the company. Online retail media is the fastest-growing segment of the $700 billion digital ad market, according to GroupM. Not surprisingly, ad services has been Amazon’s fastest-growing business, climbing to $56 billion in revenue last year.
Amazon Web Services (AWS) continues to lead the cloud computing market, where businesses are increasingly migrating data from on-premise servers to the cloud. As more businesses continue to adopt artificial intelligence (AI) to build applications and gather insights from their data, it should continue to drive strong revenue growth for AWS. This business has been growing at double-digit rates and reached $107 billion in revenue last year.
Overall, Amazon has seen its operating cash flow soar over the last few years. But investors can buy the stock at its lowest multiple on its cash flow in more than 10 years. Considering the growth opportunities ahead in advertising and cloud computing, Amazon is, indeed, a forever stock to buy now.
This footwear company can keep stepping up
Jeremy Bowman (Deckers Outdoor): When you think of stocks that have crushed the market over the last decade, Deckers is probably not the first one to come the mind, but the footwear stock has a stellar track record.
Over the last 10 years, the stock is up nearly 800%, and that includes a pullback of nearly 50% primarily on trade-war-related concerns.
As a result, Deckers now trades at a very attractive price-to-earnings ratio of 18, which is especially low for a company still delivering strong growth with two popular footwear brands, Ugg and Hoka.
Like other footwear companies, Deckers is likely to feel some pressure from the trade war as China appears to be its second-biggest manufacturing market after Vietnam, and the trade war could make China-made goods more expensive or incentivize the company to diversify further from China.
Over the long term, Deckers should be able to overcome the volatility related to the trade war as the business is well managed with a strong gross margin and inventory control.
In the fiscal third quarter, the most recent period and which included the holiday season, overall revenue rose 17% to $1.83 billion, and it reported a gross margin of 60.3%, up from 58.7%. That’s about as high of a gross margin as you’ll find in the footwear industry, especially from a business that relies on the wholesale channel for nearly half of its revenue. Sales were up 16% and 24% at Ugg and Hoka, respectively, showing its core brands are strong.
Deckers’ business was on fire prior to the tariff announcements, and a 50% sell-off seems overdone. Over the long term, the company looks like a good bet to reward investors at the current price, especially given the strength of Ugg and Hoka.
E-commerce is still growing, and Shopify is a leader
Jennifer Saibil (Shopify): Shopify has made an incredible journey from its roots as an e-commerce website creator to become a top e-commerce services provider. The company has had its ups and downs over the past few years, but it’s fully profitable and back on track with accelerating sales growth and tons of opportunity.
Revenue increased 31% year over year in the 2024 fourth quarter, and operating income increased 61%. Free-cash-flow margin improved a full percentage point to 22%.
Management is focusing its growth efforts in a few key areas. It now offers a full retail management solution platform that helps clients provide broad omnichannel services seamlessly, from its e-commerce tools to payment processing and even hardware.
The company has expanded its market opportunity by offering complete packages as well as single services, reaching beyond its core target market of small businesses looking to get an online presence to capture more large and enterprise customers. Some of its large clients include well-known names like Reebok and Crate & Barrel, and it added new names like Aldo and Uncommon Goods in the fourth quarter.
The company launches 100 to 150 new features every six months, keeping up with changing trends and technology to stay in the top spot in the U.S. It’s also acting to grab market share in the international scene, where it still trails other e-commerce platform providers. International sales increased 33% in 2024, outpacing overall sales, and growing to 30% of the total.
Shopify is also benefiting from organic growth as e-commerce increases as a percentage of retail sales. They came in at 16.1% of total U.S. retail sales in 2024, up from 15.3% in 2023, according to the U.S. Department of Commerce.
Shopify has multiple growth drivers in a hot industry, and it has years of opportunity ahead.