If you’re looking for a good place to invest your money in the consumer goods sector, you’ve probably considered investing in either Amazon (NASDAQ: AMZN) or Home Depot (NYSE: HD). While they have very different businesses, shares of both companies have accelerated over the past year. (Home Depot stock is up 33%, and Amazon has gained 38%, as of this writing, Nov. 19.)
Here’s the case for both of these consumer goods juggernauts, and why one looks like the better stock to buy right now.
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Amazon holds a commanding 40% of the U.S. e-commerce market, leaps and bounds ahead of fellow retail competitor Walmart‘s 7.4%. The company’s latest quarter highlights its impressive position.
Amazon’s North American sales popped 11% in the third quarter, which ended Sept. 30, to $95.5 billion. Investors wondering if the company can continue to fend off rivals need to look no further than Amazon’s new launch of its ultra-cheap products through Amazon Haul. The mobile-only marketplace competes with the low-priced marketplaces Shein and Temu, and all prices are under $20.
Of course, there’s far more to Amazon than just its retail sales. The company’s cloud computing business, Amazon Web Services (AWS), is the leading cloud company, with 31% of the market. Cloud computing was already a fast-growing market, but it’s being supercharged by artificial intelligence (AI). Goldman Sachs estimates cloud computing will grow into a $2 trillion market by 2030, thanks to AI.
AWS sales increased 19% in the third quarter to $27.5 billion. With AI fueling more investments in cloud computing, Amazon should continue to benefit.
Home Depot is just coming off a solid third quarter, ended Oct. 27, where revenue and earnings beat Wall Street’s expectations. Sales rose 6.6% to $40.2 billion, ahead of analysts’ consensus estimates of $39.3 billion. Similarly, the company’s diluted GAAP earnings per share of $3.67 outpaced the consensus estimate of $3.64.
The company is in a strong position in the home improvement space, with an estimated 28% of the market in 2023, compared to just 17% for Lowe’s. Home Depot also has impressive margins: Its operating margin is 13.5%, with $5.4 billion in operating income.
Home Depot’s management says there’s pent-up demand for home renovations, which could boost the company’s growth whenever it comes. Speaking about its customers’ desire to work on projects, Home Depot CFO Richard McPhail told CNBC recently: “There is demand for remodeling, and they are putting it on hold until they see a more favorable financing environment. And so the demand is there; the question is when it’s unlocked.”
