Best Stocks to Buy Right Now: Amazon vs. Disney

Amazon (AMZN -1.14%) AND Disney (DIS -2.29%) Both dominate their industries and have enormous potential across different types of businesses. Both companies have felt the pressure over the past few years, like most companies in an unstable economy, and their shares are rising again.

If you could choose just one for your portfolio today, what amazing stocks would be the right choice?

The Amazon case: e-commerce, artificial intelligence and more

Amazon is the second largest company in the US by sales, but its size shouldn’t stop you from thinking its growth is over. The company has many favorable conditions that can propel it forward, and thanks to its unrivaled dominance, it can benefit more than any other from external factors favoring growth.

Either way, for now, its core business remains e-commerce. E-commerce continues to gain a foothold in American households and continues to grow as a percentage of total retail sales. Amazon continues to improve its e-commerce logistics, making it the go-to shopping source for more shoppers. Since they rely on Amazon for most essentials and other purchases, Amazon should continue to enjoy growth from e-commerce.

Some recent investments in delivery systems include moving to a regional fulfillment network and putting more products in each box. Thanks to the restructuring, orders reach customers faster and Amazon costs less, which leads to higher profits and greater customer loyalty.

But the biggest thing everyone is talking about right now is Amazon’s investment in the generative artificial intelligence (AI) that powers Amazon Web Services (AWS) products. A powerful AI program has been created with several levels of customization to meet a variety of needs, from developers to store owners. AWS is the world’s largest cloud services company and continues to sign new customers and expand with existing customers, including Southwest Airlines and Stripe in the first quarter of 2024. AI services are another attraction for new customers, and AWS sales growth accelerated to 16% year-over-year in the first quarter.

Amazon’s fastest-growing business is advertising, which grew 23% year over year in the first quarter. Amazon’s e-commerce platform, where customers can already spend money, is an obvious space for advertisers, and Amazon’s artificial intelligence algorithms can show shoppers exactly what they’re looking for, leading to high conversions. It also recently launched an ad-supported streaming platform, joining the ranks of Disney and Netflixwhich expands advertising opportunities (in addition to generating higher streaming sales).

Amazon is well-positioned to dominate these industries and maintain its advantage for the foreseeable future.

The Disney Case: Profitable streaming will lead to explosive growth

Disney has been struggling since the beginning of the pandemic, but it’s getting closer to its history as a profitable growth machine. Like Amazon, it is a leader in several areas, from theme parks to movies and streaming. However, its model is closed and its entire activity revolves around entertainment and its unparalleled content and characters.

Parks are returning to strong growth. Disney offers unique, immersive experiences that loyal fans can’t find anywhere else, and the company has managed to increase ticket prices as demand grows. It will invest $60 billion over the next 10 years in parks and other attractions, including resorts and cruises. Unlike the company’s other businesses, its parks are almost impossible for competitors to replicate, making them extremely valuable assets.

But Disney also excels when it comes to movies and content. It typically generates more top-grossing films at the box office than any other company, with multiple studios including Disney, Pixar, Marvel, 20th Century and others. These films ultimately fill streaming channels and also lead to sequels and related content that fuels the entertainment model.

Disney is the leading streaming network, but it cost a lot of money to achieve this goal. Investors were disappointed with how long it took to reach profitability, but the company saw significant progress in its fiscal second quarter (ended March 30), in which streaming entertainment, excluding sports, was already profitable. It anticipates reaching full profitability in the fourth quarter, which will happen soon.

If that happens, with the parks in good shape and theaters showing some of the expected blockbusters, Disney’s stock could rally by the end of the year. In the long run, it will be well-positioned to grow its business in every aspect – experiences, videos and streaming.

One of these stocks looks better than the other today

Shares of Disney and Amazon are beating the market this year, although Disney’s stock fell after its second-quarter report. Revenue grew only 1% and saw a significant decline in generally accepted accounting principles (GAAP) earnings per share.

Amazon is the winner in this competition. Disney continues to grapple with several challenges, from unprofitable streaming to the continued decline of its linear network segment, which includes broadcast and cable television. Amazon, on the other hand, is in full growth mode and looks like it’s an excellent stock to consider right now.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Jennifer Saibil holds positions at Walt Disney. The Motley Fool covers and recommends Amazon, Netflix and Walt Disney. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.