Should you forget about Amazon? Why you might want to buy this unstoppable growth stock

There are no two ways about it. Amazon is one of the best-performing stocks of the modern era, up roughly 300,000% since its 1997 IPO. The next 30 years likely won’t be as rewarding, but thanks to the foray of the company in cloud computing, the e-commerce giant remains one of the most promising investment prospects on the market right now.

However, there is better growth value to add to your portfolio here. That’s it Uber Technologies (NYSE: UBER). Here’s why.

While founders Travis Kalanick and Garrett Camp didn’t exactly invent the premise of ride-hailing apps, they’re pretty much credited with bringing the idea into the mainstream. It’s still catching on with consumers, too. Uber’s 20% revenue growth in the third quarter extends well-established trends. And it is increasingly profitable.

UBER Revenue (Quarterly) Chart — UBER Revenue (Quarterly) data for YCharts

Analysts also expect higher and lower growth going forward.

Uber's top and bottom lines are expected to grow steadily through at least 2026. — Data source: StockAnalysis.com. Chart by author.

This forward progress is only part of the bullish argument for a stake in Uber, and not even the most important part. Far more important is the underlying cultural reason for this continued growth in sales and earnings. In other words, car ownership is in decline. Ditto even for getting a driver’s license.

Figures from the US Federal Highway Administration reported by the legal information website Consumer Shield tell the story, indicating that national car registrations have declined from a peak of 138 million in 2001 to a low of several decades from just under 100 million by 2022. The COVID-19 pandemic and its aftermath are responsible for at least some of the more recent weakness on this front. But that count has been steadily declining since long before the contagion took hold.

You may see or hear different data. In particular, a commonly cited figure from the Federal Highway Administration suggests that by 2022 there were actually 283.4 million registered vehicles on US roads. This count includes buses and heavy trucks, however, which are generally owned by governments and corporations for commercial or public service purposes.

So is the number of vehicles sitting in people’s driveways relatively stagnant…at least as a percentage of US households. Consumer Shield adds that as of 2022, the typical American household will own 1.83 automobiles, extending a slight downward trend from the 2001 peak of 1.89.

A similar dynamic is also evident outside the US, where Uber is expanding.

This shallow downtrend seems unlikely to reverse anytime soon. A recent survey by ride-sharing network Zipcar indicates that more than one in three Americans are considering not owning a vehicle by 2030. In fact, nearly one in five of those respondents say they they take themselves very seriously. get rid of their cars and use other forms of transport.

And other data underline this growing disinterest. For example, Hedges Company predicts that total U.S. sales of light vehicles (sedans, SUVs, not commercial trucks) are on track to reach a modest 15.9 million units this year despite a decent economy and a greater stability post-Covid. That’s up from 2023’s count of 15.5 million, but still well below 2016’s peak of 17.4 million.

Younger consumers are also growing up with less interest in vehicle ownership than their parents…or even a driver’s license. Figures from the US Department of Transportation indicate that as of 2022 only about a quarter of the nation’s 16-year-olds had a license, compared with half of that age group in 1983. Even the number of drivers of 18 years has gone down. from 80% then to only 60% now.

The main reasons for this previously unlikely dynamic? The cost is one; the average new car payment is now over $700 a month. Lack of need is another. Younger generations are completely comfortable finding entertainment and maintaining a social life through a computer. A transportation service like Uber makes it possible to live and work in an environment where this perspective is increasingly the norm.

And again, this dynamic is evident in other parts of the world.

None of this to suggest that owning Amazon stock right now is a mistake. Still a great move. Indeed, in many ways Amazon benefits from the same underlying dynamics that are driving Uber’s growth. This is the growing number of consumers who are content without even owning or driving a vehicle. These people are equally happy to shop online and let Amazon figure out how to get the products to their door. (Meanwhile, cloud computing powerhouse Amazon is riding a different growth trend.)

However, of the two tickers in question, Uber is arguably the more promising prospect simply because many investors still underestimate how strong its cultural tailwind is and how long it could persist. For perspective, market research team Future Market Insight believes the global car transport market will grow at an average annualized rate of 15.4% through 2034.

Market leader Uber is poised to capture at least its fair share of that growth.

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* Stock Advisor returns on December 30, 2024

John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the aforementioned stocks. The Motley Fool has positions and recommends Amazon and Uber Technologies. The Motley Fool has one disclosure policy.

Should you forget about Amazon? Why you might want to buy this unstoppable growth stock was originally published by The Motley Fool

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