It's hard to get excited about a stock when it's down in the dumps. Oftentimes when a company's share price falls to hardly a-pulse level, there are good reasons for the fall. It can be hard to imagine the stock resuscitating to any degree.
But companies do recover, and in some instances quite spectacularly. These two were once well out of favor with the market, but managed to roar back into the good graces of the investors lately. And, in the process, make their more patient shareholders much wealthier.
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A model example of a high-flyer stock, Amazon.com (NASDAQ: AMZN) has been soaring especially high of late, thanks in no small measure to an unprecedented run of ten straight quarters of bottom-line profitability.
Amazon is one of the hardy survivors of the dotcom era of the late 1990s and early 2000s. It wasn't particularly an outlier back then -- it started out selling books online, not cool gadgets or cutting-edge fashion, and like many other e-companies of its age it routinely booked a net loss. The company's share price was eviscerated when the market crumbled around dotcom stocks after the turn of the century.
Led by determined founder and CEO Jeff Bezos, though, Amazon not only held on, but managed to expand. It plowed billions of dollars into growth, spending generously to establish new business lines. Famously, these expenditures often bit hard enough into revenue to keep the company in the red; its bottom line and its stock price were real see-saws for years.
Expansion is really paying off for Amazon now, however. It's the go-to retailer everyone is familiar with and likely utilizes for one good or another -- if not general merchandise, then electronics, groceries, streaming video, or any one of the thousands of other product categories on its site.
Buttressing Amazon's forays into every conceivable corner of retail is the stellar performance of its Amazon Web Services division. Although AWS is fairly small in relation to the monster size of the company, it's quite the growth engine.
In Amazon's latest reported quarter the unit brought in $4.6 billion in revenue, a steep 26% improvement on a year-over-year basis. As a high-margin business it's very good for the bottom line, producing $1.2 billion in operating profit for the quarter.
The company is showing no signs of slowing down; rather, as evidenced by its bold $13.7 billion acquisition of Whole Foods Market, in some respects it's only getting started. This will continue to be an exciting stock to watch.
It's certainly been a lucrative one to own -- a $5,000 investment in Amazon in the summer of 2006 is worth around $216,000 today.
Like Amazon in retail, Netflix (NASDAQ: NFLX) is the early 21st century success story in entertainment. In spite of the proliferation of streaming video services from seemingly every company plugged into the film and TV world (including Amazon), Netflix is by far the No. 1 in terms of number of paying subscribers.
Its numbers continue to grow, rising by 26% on a year-over-year basis to a global total of over 109 million in the company's Q3.
Clever strategy and thorough implementation have propelled Netflix by steps onto the top tier. It read the tea leaves and shifted from DVD home delivery to streaming. Then it pivoted again from showing content provided largely by traditional studios, to distinctive originals (like Stranger Things and Orange is the New Black) that have roped in devoted audiences.
Netflix, then, is much more than a home video service. It's now a busy movie and TV studio in its own right, directly challenging old-line Hollywood players on their own turf. The latest buzz-worthy, big-budget science fiction action adventure coming to your local cinema, Bright, isn't from Universal or Warner Bros. -- it's being distributed entirely by Netflix.
The company not only has a knack for identifying what works and profiting from it, it's also good at cutting and running. A dumb idea it had in 2011 to divide the (popular, at the time) DVD-by-mail delivery and the streaming services into two separate offerings was quickly abandoned after understandable customer outcry.
In spite of those heavy investments into content, Netflix has been consistently profitable of late. And on the back of that growing subscriber count, its revenue has risen precipitously (it grew by 30% in Q3 to hit almost $3 billion). There's probably plenty more where that come from for both metrics.
A $5,000 buy-in to Netflix during its pure DVD-by-mail days crossed the $200,000 mark several months ago. Although the stock hasn't moved much this month, it is still very close to its all-time high of just over $200 per share.
On the rise
What's great about investing in the stock market is that these kind of share price improvements, while not typical, aren't unique. You can find other inspiring stock blowup stories here and here. And as long as the market remains buoyant -- or recovers effectively from slumps -- there will be more in the future.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Netflix. The Motley Fool has a disclosure policy.