JThe stock market hasn’t been a happy hunting ground for investors in 2022, but investors willing to look past the volatility could strike a fortune if they buy and hold solid companies for a long time.
This is evident from the impressive yields that some prominent actions have generated During the last decade. Advanced micro-systems (NASDAQ: AMD), Palo Alto Networks (NASDAQ: PANW)and Amazon (NASDAQ: AMZN) are three high-flying companies that have made investors significantly richer over the years.
More importantly, these tech companies have excellent growth prospects that should help them replicate their exceptional gains over the next decade. Let’s take a look at why investors looking to retire as millionaires after a decade should consider investing $50,000 in these three names.
1. Advanced microdevices
A $50,000 investment in AMD stock at the start of 2012 was worth over $1.3 million by the end of 2021. Sure, the stock is down 42% so far in 2022, but investors who bought the company’s stock a decade ago are still sitting on the fat gains.
The good part is that AMD’s fall this year has made the stock attractive in terms of its valuation. Stocks price/earnings ratio (P/E) of 31 is well below its five-year average multiple of 105. The forward P/E ratio of 20 points to healthy growth in AMD’s bottom line over the next year.
More importantly, a closer look at the markets AMD serves tells us that this company could grow at an impressive rate in the years to come. Take the data center business, for example, which currently produces about 20% of AMD’s total revenue. The chipmaker has enjoyed tremendous traction in this market as AMD’s data center revenue doubled year-over-year in the first quarter of 2022.
It wouldn’t be surprising to see data center activity move the needle more significantly for AMD. The company sells data center processors (central processing units), GPUs (graphics processing units), data processing units (DPUs), and field programmable gate arrays (FPGAs). Data center activity has so far been driven by CPU and GPU activity, but AMD has strengthened its prospects in this space with the acquisitions of Xilinx and Pensando.
As a result, AMD now has a comprehensive chip portfolio to target the rapidly growing data center accelerator market, which is expected to grow at an annual growth rate of 32.5% through 2031 according to a third-party estimate. Throw in AMD solid prospects in the field of video gameswhere demand for the chips that power PCs and game consoles is set to rise, and it’s easy to see why analysts expect its earnings to grow nearly 33% annually over the next five years – a growth rate that it could sustain for a longer period thanks to the catalysts mentioned above.
2. Palo Alto Networks
Palo Alto Networks is another stock that has proven to be a great investment. A $50,000 investment in Palo Alto in July 2012 when it debuted on the stock market was worth more than $508,000 by the end of 2021.
The secular growth of the cybersecurity market and the growing dominance of Palo Alto should help the company replicate these tremendous gains over the next decade. According to a third-party report, the global cybersecurity market could generate $500 billion in revenue by 2030, registering an annual growth rate of 12% through the end of the decade.
Palo Alto Networks is in a strong position to capitalize on this incremental revenue opportunity as it outpaces industry growth. The cybersecurity specialist is on track to end fiscal 2022 with revenue growth of 29% to around $5.5 billion. More importantly, Palo Alto’s remaining performance obligations — a metric that represents the total value of customer contracts for which the company has not yet provided services and recognized revenue — indicates that its offerings are in high demand.
Palo Alto’s remaining performance obligations for the third fiscal quarter (which ended April 30) rose 40% year-over-year to $6.9 billion. The faster growth of this metric relative to its actual revenue, along with the fact that it easily exceeds the company’s $5.17 billion year-over-year revenue, suggests that Palo Alto’s rapid growth is here to help. stay.
It should be noted that Palo Alto growth strategy focused on acquisitions has done wonders so far, allowing him to grab a bigger share of the cybersecurity market. Analysts predict Palo Alto’s annual earnings growth of 27% for the next five years, though it’s no surprise to see it sustain that growth for the next decade thanks to the factors discussed above.
Amazon stock has lost a third of its value in 2022, but investors should remember that the e-commerce and cloud computing giant has been an exceptional investment over the years. A $50,000 investment in Amazon stock at the start of 2012 was worth over $960,000 by the end of 2021.
The stock’s sharp decline this year gives investors the opportunity to buy this tech giant at a relatively cheap valuation. Amazon stock currently has a P/E ratio of 52, indicating a significant discount from its five-year average of 122. The sales multiple of 2.34 also represents a discount from its five-year average multiple of 3. ,9.
Investors should consider using Amazon’s relatively attractive valuation to buy the stock and prepare their portfolios for potentially strong gains over the next decade. Indeed, the company is a key player in two lucrative markets.
For one thing, Amazon controlled 56.7% of the US e-commerce market in 2021. That’s double Amazon’s share of 28.1% in 2014. So the company still has room for improvement. place to grow its e-commerce business in the lucrative US market, where the online channel accounts for just 23% of overall retail sales. Morgan Stanley estimates that the e-commerce channel could account for 31% of overall US retail sales by 2026.
The e-commerce market in the United States reportedly generated $767 billion in revenue last year. It is expected to generate $1.33 trillion in sales by 2025, and it could see solid growth beyond that as well as an increase in e-commerce penetration. As a result, Amazon’s e-commerce business appears set for secular growth in the United States.
The cloud computing market is another reason to be positive about Amazon’s future. The Amazon Web Services (AWS) business controls one-third of the global cloud services market, which was worth around $180 billion in 2021. The cloud computing market is expected to grow at an annual rate of 17% through 2030.
It should be noted that AWS has consistently maintained its cloud computing market share over the past five years despite competition in this niche. As a result, the massive cloud computing opportunity has the potential to boost Amazon’s long-term growth as well as the e-commerce opportunity. That explains why analysts predict Amazon’s annual earnings growth of 40% over the next five years, even though its catalysts could help sustain growth through the end of the decade.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Chauhan hard has no position in the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices, Amazon and Palo Alto Networks. 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.