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A Bull Market Is Here: 2 Magnificent Growth Stocks to Buy and Hold

Growth stocks are back in style. The current bull market has been going on for over a year and was preceded by challenging conditions that especially affected growth-oriented corporations. Investors might be tempted to profit from the ongoing bull run by buying shares of equities that can outperform in this period.

However, picking stocks that can deliver outsize returns beyond the current run is even more important. Two great examples are Amazon (NASDAQ: AMZN) and Airbnb (NASDAQ: ABNB).

1. Amazon

Many doubted Amazon in 2022. The company's revenue growth was not impressive, advertising sales were lagging, expenses were rising, and it delivered a rare net loss. The tech giant has pulled off a remarkable comeback since, partly thanks to improved economic conditions. Amazon also initiated cost-cutting measures that helped lift its bottom line back into the green.

Amazon's shares have delivered excellent returns over the past year, but there is a more important lesson here. Amazon's business is solid enough to handle challenging market and economic conditions and come out stronger.

The company's long-term prospects remain intact, too, even with a market cap of $1.76 trillion. Amazon is a leader in nearly every industry where it does business, many of which have miles of growth left ahead. No competitor has a greater market share in e-commerce in the U.S. or the global cloud computing space, which looks especially promising.

Amazon's cloud computing segment is the most profitable of all. In 2023, Amazon Web Services' (AWS) revenue of $90.8 billion accounted for almost 16% of the company's total sales of $574.8 billion. However, AWS' operating income came in at $24.6 billion, nearly 67% of Amazon's operating income of $36.9 billion. And last year was a down year for the cloud market: AWS' sales increased by just 13.3% year over year.

There is a long runway for growth for Amazon's AWS, which arguably benefits from switching costs. Amazon's bottom line and margins will only improve with the increased adoption of its cloud services. The company is also making a play in the artificial intelligence (AI) market. The most important aspect of Amazon's business is that the company has constantly found new and promising growth avenues to exploit.

It has been somewhat unsuccessful sometimes, but over the long run, Amazon should succeed in finding new exciting growth avenues, be it in AI, healthcare, or elsewhere. Amazon is not only an outstanding stock to ride the current bull market, but also an equally excellent pick for investors looking far beyond it.

2. Airbnb

Airbnb's stock has lagged the market over the last year, though the company has generally recorded strong financial results.

In 2023, the vacation rental platform recorded revenue of $9.9 billion, 18% higher than the previous fiscal year. Airbnb's net income of $4.8 billion more than doubled year over year, while it ended 2023 with a free cash flow of $3.8 billion, a slight increase from the $3.4 billion reported in 2022.

Why is Airbnb failing to keep pace with broader equities despite its strong results? There are likely at least two reasons. First, the company has had to deal with new laws that affect its business in notable areas, such as New York, over the past year. Second, Airbnb's stock looks expensive based on traditional valuation metrics.

ABNB PE Ratio (Forward) Chart

ABNB PE Ratio (Forward) data by YCharts

Perhaps the market expected even stronger results. These issues are hardly a deal breaker, though, at least for investors looking at the long term.

For one, Airbnb's ecosystem continues to expand. The company now has more than 5 million hosts and 7.7 million listings. An important aspect of Airbnb's business is its platform network effect, so the more its ecosystem grows, the stronger its economic moat becomes.

Meanwhile, Airbnb is taking advantage of key opportunities by entering underpenetrated markets. The company listed Germany, Brazil, and Korea as three regions where it delivered exciting results recently.

Airbnb is just getting started. Management also pointed to new growth opportunities by announcing it was going "beyond the core." While Airbnb did not give many details, investors should be thrilled.

In my view, there is enough growth potential within the company's core: People won't stop traveling anytime soon. Airbnb is one of the best and most popular platforms for travel arrangements. Adding more functions to its core offering could unlock massive opportunities.

The bottom line: Airbnb's recent underperformance shouldn't scare off investors. The stock remains an excellent buy-and-hold option.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Prosper Junior Bakiny has positions in Amazon. The Motley Fool has positions in and recommends Airbnb and Amazon. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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