Joinvestors need large-cap stocks in their portfolios. These proven companies provide most of the index returns as both S&P 500 i Nasdaq Composed are weighted by market capitalization. Large-cap stocks have also gotten their massive sizes because of their history of exceeding expectations and causing patient investors to have steady returns.
Compensation has always been marked as a sacrifice of growth for the stability provided by large-cap stocks. But investors are increasingly rejecting this false narrative, as many large-cap technology stocks continue to record above-average growth rates. These three large-cap companies offer the stability of large-cap stocks, with above-average growth potential.
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Amazon’s narrative of “slow growth” is too bearish
Amazon (NASDAQ: AMZN) it has made many investors rich on its way to a $ 1.7 trillion market cap, including its founder Jeff Bezos, now the second richest man in the world. If it had invested $ 10,000 in its market debut in 1997, its stake will be worth more than $ 20 million today.
That said, Amazon shares are following the S&P 500 this year, with a 3% yield versus 17% of the index. Despite a 27% year-over-year increase in revenue, Amazon lost analysts ’expectations by 29% higher. In addition, the company projected third-quarter revenue to reach $ 109 billion at midpoint, below the agreed-upon estimates of $ 119 billion.
After being guilty of making no profit for years, Amazon destroyed earnings per share estimates by 23% despite getting lost in the front line. Ironically, investors ignored the increased profitability of the business to focus on slowing growth.
There are reasons for long-term investors to consider this just noise. Pandemic blockades increased the demand for e-commerce last year, making 2021 a difficult year for comparisons. However, Amazon’s higher-margin business segments, such as third-party vendor services (38%), AWS (37%) and subscription services (32%), exceeded analysts ’expectations.
However, what is exciting is the rest of the company’s divisions, which are mostly advertising. During the quarter, revenue attributable to others has increased 87% and is now half the size of AWS. Amazon’s temporary sale has given long-term investors an attractive entry point.
Slowing the growth of Facebook users is not a problem
Facebook‘s (NASDAQ: FB) Mark Zuckerberg is not as rich as Bezos, as he followed him for an estimated $ 70 billion, but at 37 he still has a long career ahead of him. Zuckerberg has grown Facebook from an idea to a $ 1 trillion market cap, and shares are currently 840% higher than its $ 38 IPO nine years ago. And there are still long-term control drivers ahead of the company.
Facebook’s stock recovery came to a halt due to second-quarter earnings, despite revenue up 56% and EPS up 101%, both higher than agreed estimates. Investors were disappointed with the company’s comments about revenue growth in the back half of 2021 and the fact that daily active users in the lucrative US and Canadian markets declined over the corresponding period of the year. previous.
Like Amazon, Facebook is back to normal after the pandemic. Understandably, the use of social media exploded during the pandemic and the return to more face-to-face events would always impact the company’s commitment.
Despite the modest annual decline in daily active users (DAU) (1.5%), the company still has 195 million people in the United States and Canada accessing a Facebook product daily and can earn revenue by increasing costs. by announcement, how did this fourth.
Zuckerberg now focuses on his boldest plans to date: the metaverse. The company acquired the virtual reality company Oculus in 2014 and plans to use its headphones to create a whole new virtual world for users. The positive potential may be greater than anything that has yet been done.
Apple is going from strength to strength
By now, you may have identified an issue in previous stocks, as they are all megacap technology companies that were sold after the gains. In this context, apple (NASDAQ: AAPL) it’s a natural adjustment, as the shares sold moderately after the company reported third-quarter tax gains. Although its market capitalization is approaching $ 2.5 trillion, the company continues to have growth engines.
Despite concerns about the saturation of the iPhone market, Apple increased revenue attributable to the device by 50% over the previous year and increased total revenue by 36%. While Apple easily exceeded analysts ’earnings and earnings expectations, investors reacted negatively to CEO Tim Cook’s comment that the shortage of chips could affect iPhone and iPad sales in the current quarter .
Although scarcity is never ideal, in the short term it is an example of a “good problem”. Demand outstripping supply means your product is coveted and many iPhone users are unlikely to leave their ecosystem to buy an Android. In fact, it is this small user base that will drive Apple’s next phase of growth, as Apple has been aggressive in monetizing its installed base with subscription-based services and recurring revenue. .
Revenue attributable to services grew by 33% over the previous year, an acceleration over the growth rate of 27% in the previous quarter. During the earnings call, Cook noted that the company has about 700 million subscribers, 27% more than the previous year. Ignore the bottleneck of chips in the short term, Apple has a lot of growth levers to pull it off.
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John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a board member of The Motley Fool. Randi Zuckerberg, a former director of market development and Facebook spokesperson and sister of its CEO Mark Zuckerberg, is a board member of The Motley Fool. Jamal Carnette, CFA, owns shares in Amazon. The Motley Fool owns shares and recommends Amazon, Apple and Facebook. The Motley Fool recommends the following options: long calls from January 2022 to $ 1,920 on Amazon, long calls from March 2023 to Apple, long calls from January 2022, $ 1,940 to Amazon, and short calls from March 2023, $ 130 to Apple. The Motley Fool has a disclosure policy.
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