There are no two ways about it. Amazon is one of the best performing stocks of the modern era, up about 300,000% since its public offering in 1997. The next 30 years are not likely to be nearly as rewarding, but thanks to the incursion of the company in cloud computing, the e-commerce giant is still one of the most promising investment prospects on the market at the moment.
However, there are better growth stocks to consider adding to your portfolio here. Here we go Uber Technologies(NYSE: UBER). Here’s why.
Although 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 also catching on with consumers, too. Uber’s third-quarter revenue growth of 20% extends well-established trends. And it is always more profitable.
Analysts expect even more top-line and bottom-line growth in the future.
Data source: StockAnalysis.com. Chart by author.
This forward progress is only part of the bullish argument for owning a stake in Uber, however, and not even the most important part. Much more important is the underlying cultural reason for this continued growth in sales and earnings. That is, car ownership is on the decline. Ditto for even having a driver’s license.
US Federal Highway Administration numbers reported by the legal information website Consumer Shield tell the story, indicating that domestic car registrations have declined from a peak of 138 million in 2001 to a decade low of just under 100 million in 2022. The COVID-19 pandemic and its fallout are responsible for at least part of the most recent weakness in this front But that count has been steadily declining since long before the contagion took hold.
You can see or hear different data. In particular, a figure cited by the Federal Highway Administration suggests that by 2022 there would actually be 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.
The number of vehicles sitting in people’s roads is also relatively stagnant…at least as a percentage of American households. Consumer Shield adds that by 2022, the typical American family 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 United States, where Uber is expanding.
It seems unlikely that this downward trend is set to reverse anytime soon. A recent survey conducted by the car-sharing network Zipcar indicates that more than one in three Americans consider not owning any vehicle by 2030. Almost one in five of these respondents, in fact, say they are very serious. get rid of their cars and use alternative forms of transportation instead.
And other data underline this growing disinterest. For example, Hedges Company predicts that total sales of light vehicles (sedans, SUVs, not commercial trucks) in the United States are on pace to reach a modest 15.9 million units this year despite the decent economy and the larger post-COVID stability. That’s up from the 2023 count of 15.5 million, but still markedly below the 2016 peak of 17.4 million.
Younger consumers are growing up with less interest in vehicle ownership than their parents, even… or even getting a driver’s license. Figures from the US Department of Transportation indicate that by 2022 only a quarter of the nation’s 16-year-olds will have a license, versus half of that age group in 1983. Even the number of drivers of 18 years fell. from 80% then to only 60% now.
The main reasons for this once unlikely dynamic? The cost is one; the average payment for a new car is now more than $700 per month. Lack of need is another. Younger generations are completely comfortable finding entertainment and maintaining a social life via a computer. A travel service like Uber allows you to live and work in an environment where such a perspective is increasingly the norm.
And again, this dynamic is evident in other parts of the world.
None of this is to suggest that owning Amazon stock at this point in time is a mistake. It’s still a great game. In fact, in many ways, Amazon benefits from the same underlying dynamics driving Uber’s growth. It is the growing number of consumers who are content without owning or even driving a vehicle. These people are similarly content to shop online and let Amazon figure out how to get the products to their door. (Meanwhile, Amazon’s cloud computing workhorse is riding a different growth trend.)
Of the two tickers in question, however, Uber is arguably the more promising prospect simply because so many investors still underestimate how strong its cultural tailwind is and how long it might persist. For perspective, market research team Future Market Insight believes that the global transportation market is set to grow at an average annual rate of 15.4% until 2034.
Market leader Uber is poised to capture at least its fair share of this growth.
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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 stocks mentioned. The Motley Fool has positions and recommends Amazon and Uber Technologies. The Motley Fool has a disclosure policy.
