2 FAANG stocks that could crush the S&P 500 by 2030

Building wealth in the stock market is not complicated. It simply involves holding shares of companies in steady growth over many years. Over the past decade, a small group of elite growth stocks has become the default choice for investors seeking above-average returns. These have become known as FAANG stocks, which include the following:

• Meta platforms (formerly Facebook)
• Apple
• Amazon (AMZN 2.50%)
• Netflix (NFLX 1.82%)
• Alphabet (formerly Google)

You can make a case for buying all of these stocks. All have solid competitive advantages and favorable long-term prospects, although some offer more compelling return potential than others.

If you are looking for the best FAANG stocks to beat the historical 10% return of S&P 500 index, here are two I’d put my money on.

1. Amazon

Amazon is a big business, with $604 billion in revenue over the past 12 months, but the company continues to grow at rates that can support market returns.

Trailing-12-month revenue rose 12% year-on-year in the company’s second quarter (ended June 30), with the biggest growth rates coming from non-retail services such as advertising and cloud computing. While online store revenue grew just 6%, Amazon’s efforts to cut costs, improve fulfillment efficiency and speed up delivery could translate into additional e-commerce market share gains.

To date, Amazon has shipped more than 5 billion units in a day. The faster shipping speed appears to be driving the desired result, which is increasing order frequency, as management reported an acceleration in its core day-to-day business in the second quarter. This shows that Amazon is strengthening its competitive advantage in retail.

Efficiency gains in fulfillment also lead to higher profits. Operating income nearly doubled in Q2 to $14.7 billion from the year-ago quarter. There are still plenty of opportunities to cut costs, including expanding the use of automation and robotics and consolidating multiple orders into a single box. The company could expand margins for several years, taking into account growth opportunities in profitable non-retail businesses such as Amazon Web Services and advertising.

Analysts expect Amazon’s earnings to grow at an annual rate of 22% over the next few years. Even allowing for a lower price-to-earnings (P/E) ratio over the next six years, Amazon investors could double their money by 2030 and outperform the S&P 500.

2. Netflix

Netflix has become a big entertainment business over the past decade, with 277 million subscribers. But that doesn’t mean his comeback potential is over. The company continues to grow revenue at double-digit rates, and the opportunities to grow profits by expanding margins make it a great stock to hold over the next six years.

Netflix delivered excellent results in its second quarter (ended June 30), with revenue and global paid subscriptions up nearly 17% year over year. The company continues to see a positive impact on subscriber growth from paid sharing, which ends password sharing between members and increases revenue.

Netflix is ​​already earning industry-leading margins in the entertainment industry, with an operating margin of 27% in Q2. Management is committed to growing margins every year, but given that it’s very early in expanding its advertising business, there’s a long window of opportunity to grow profits.

In addition, Netflix still has an attractive revenue growth opportunity. There are over 1 billion broadband users worldwide and over 5 billion basic internet users. Netflix still has a small share of connected TV penetration, which could provide years of incremental subscriber growth globally.

All in all, Netflix can deliver solid growth for many years. Analysts expect Netflix’s earnings to grow 27% on a year-over-year basis, yet the stock trades at a forward P/E of 31 relative to 2025 earnings estimates — a reasonable valuation for this earnings potential. Investors can expect Netflix stock to rise with earnings, which should easily lead to market returns through 2030.