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Artificial intelligence is a driving factor at Amazon.
Dutch Bros is a combination of strong same-store sales growth and expansion opportunities.
E.l.f. is ready to rejuvenate its revenue growth with the Rhode acquisition.
The market has no shortage of opportunities, but three of my favorites are in stocks in the consumer space. Technology gets all the hype, but this is another great sector in which to find top growth stocks.
Let's look at three growth stocks to own for the long haul.
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Amazon (NASDAQ: AMZN) is the undisputed leader of e-commerce. Its secret weapon was aggressively building its warehouse and logistics network in its early days. This was an expensive endeavor, but it enabled the company to quickly get goods to customers at the click of a button.
Even today, Amazon continues to work tirelessly to improve its fulfillment centers and logistics networks. But instead of just building more warehouses and hiring more drivers, it's working to become more efficient through the use of artificial intelligence (AI) and robotics.
The company has more than a million robots in its fulfillment centers, and they're coordinated by its DeepFleet AI system. These robots aren't just moving packages. Many can do advanced picking and sorting, and some can even recognize damaged items before they are shipped. It's also using AI to better plan delivery routes, and to optimize which warehouses to store items to be closest to likely delivery destinations.
AI has also transformed Amazon's advertising business. Merchants can use the company's AI tools to fine-tune listings and ad campaigns, helping drive one of Amazon's fastest-growing and highest-margin businesses. Amazon's ad revenue jumped an impressive 23% last quarter. All of this is leading to strong operating leverage for the company's e-commerce operations.
Meanwhile, Amazon's cloud computing unit, Amazon Web Services (AWS), is both its most profitable segment and its fastest-growing. With nearly a 30% market share, AWS is the largest cloud computing company in the world, and like others in the industry, it is benefiting from robust demand stemming from AI.
Meanwhile, customers are attracted to Amazon's Bedrock and SageMaker services to help build and deploy AI models, and it has also recently come out with tools for AI agents. In addition, its custom AI chips, Trainium and Inferentia, can give customers better cost performance.
Amazon is spending heavily on AI, but the company has always come out of heavy investment cycles better and stronger. I expect that to be the case moving forward, which makes Amazon a top stock to own.
Dutch Bros (NYSE: BROS) is a growth story that doesn't look like it's slowing anytime soon. While many restaurants have recently struggled to bring in customers, the coffee house operator saw strong 6.1% same-store sales growth last quarter, with transaction growth leading the way.
That's the kind of performance most chains would love to see in this environment. But the real kicker is food. Dutch Bros has long missed out on breakfast sales because it didn't serve food. That's changing, as the company has begun testing hot food items.
Starbucks generates nearly 20% of its sales from food, compared to less than 2% at Dutch Bros, so even modest success here could be a huge incremental driver.
The biggest story for Dutch Bros, though, is expansion. Its small drive-thru-focused stores are capital-light, which allows expansion without putting stress on its balance sheet.
The company recently passed 1,000 locations and is targeting more than 2,000 by 2029, with a long-term goal of 7,000. That's a long runway. Just because its stores are small, though, doesn't mean they don't generate strong revenue, with the company's stores having impressive average unit volumes (AUVs) of more than $2 million.
With both expansion and the introduction of hot food items ahead, Dutch Bros looks like a stock that should have strong growth for a long time.
E.l.f. Beauty (NYSE: ELF) has been one of the biggest winners in mass-market cosmetics over the past few years.
Recently, the company made the bold move to enter the prestige skincare segment through the acquisition of Hailey Bieber's Rhode. The premium skincare line had already generated more than $200 million in annual sales with just a handful of products and almost no retail presence. Its launch into Sephora stores this fall should unlock another wave of growth, and there is little doubt that e.l.f. will look to use its strong retail relationships to expand distribution of the brand.
International expansion is another potential growth driver. E.l.f.'s namesake brand saw international sales climb 30% last quarter, and management is only scratching the surface there. Meanwhile, the company continues to perform well in its key U.S. retail partners like Target, while also finding success in newer outlets such as Dollar General.
The Rhode acquisition couldn't come at a better time. After years of breakneck growth, e.l.f.'s stock cooled when sales momentum slowed, and shares sit well below last summer's highs. Adding a fast-growing premium brand helps reset its growth story, especially since skincare carries higher gross margins than mass-market color cosmetics.
While the company has recently dealt with a PR misstep, it appears to have handled it well. The bigger picture, though, is that e.l.f. has a history of disrupting the beauty space, and Rhode could be its next category-defining move. For investors, this stock still looks like a winner over the next five years.
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Geoffrey Seiler has positions in e.l.f. Beauty. The Motley Fool has positions in and recommends Amazon, Starbucks, Target, and e.l.f. Beauty. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.
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