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2 Wide-Moat Stocks to Buy on a Dip

Amazon.com and ServiceNow are looking increasingly attractive.

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Growth-oriented technology stocks have sold off in 2021. We think shares of two wide-moat companies look increasingly attractive. 

First is Amazon, which we think is worth $4,000 per share. Amazon dominates in both e-commerce and public cloud services. Size and scale create selection and low prices, which draw in shoppers, which then draw in more vendors as third-party sellers in a virtuous circle. Amazon Prime offers benefits that make shopping on Amazon properties even more compelling for consumers, while providing recurring cash flow. These factors have combined to create the only demand aggregator of substance in the United States. Given its Internet presence and the obvious fact that Amazon knows so much about its shoppers, the company's advertising business has grown rapidly. From a retail perspective, we expect continued innovation to help drive further share gains. We also look for continued penetration into categories such as groceries, pharmacy, and luxury goods that have not previously translated into the same level of success as other retail categories. We also see technology advancements in AWS and a bigger push to service enterprise customers. Overall, we see strong revenue and free cash flow growth for years to come. 

Morningstar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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