Amazon vs. Carvana: Which Stock Should You Buy Now?

As an investor, you're always on the lookout for the best stocks to buy. Two companies that have caught the eye of many are Amazon (AMZN) and Carvana (CVNA). But which one should you add to your portfolio? Let's dive into the details and help you make an informed decision.



Amazon: The E-commerce Giant

Amazon is a household name in e-commerce, offering a wide range of products and services. Its Prime ecosystem, which includes Prime Day sales events, has been a significant driver of growth. The company's cloud computing arm, Amazon Web Services (AWS), is also a major revenue generator, operating at much higher margins than its core e-commerce marketplaces.



* Revenue growth (CAGR) of 11% and EPS growth of 38% expected from 2023 to 2026.
* Valued at 39 times forward earnings, which may be reasonable given its robust growth and leadership in e-commerce and cloud markets.

Carvana: The Used Car Revolution

Carvana is an online marketplace for buying and selling used cars, offering a streamlined car buying process with delivery straight to the customer's door. The company has seen remarkable growth, with its stock surging over 238% in the past two years. However, it faces challenges from rising interest rates and market fluctuations.



* Revenue growth (CAGR) of 20% and EPS growth of 72% expected from 2023 to 2026.
* Valued at two times its projected sales and 22 times its adjusted EBITDA for 2025, which may be less compelling at 128 times its forward earnings on a GAAP basis.

Which Stock to Buy?

Both Amazon and Carvana have their merits, but Amazon may be the better buy for the foreseeable future. Here's why:

1. Diversified revenue streams: Amazon's e-commerce, AWS, advertising, and physical stores provide a more stable and diversified revenue base, reducing reliance on a single market.
2. Robust growth potential: Amazon's Prime ecosystem and AWS are well-positioned to capitalize on emerging trends and technologies, driving long-term growth.
3. Reasonable valuation: While Amazon is not cheap, its valuation may be justified by its strong growth and leadership in e-commerce and cloud markets.

Carvana, on the other hand, has a higher risk profile and may be more susceptible to market conditions and consumer demand for used cars. Its valuation metrics are also less compelling, with a higher P/E ratio and enterprise value relative to its projected sales and adjusted EBITDA.

In conclusion, while Carvana has been a remarkable performer, Amazon's diversified business model, global presence, and strong growth potential make it a more attractive entry point for investors. However, it's essential to consider your risk tolerance and investment goals when making a decision. As always, do your own research and consult with a financial advisor before making any investment decisions.