Amazon (NASDAQ:AMZN) is one of the best-performing stocks in history. Replicating its success should be a priority for every investor.
Luckily, there’s one stock in particular that’s ready to make the jump. The similarities are clear, but not everyone will see this opportunity.
Here’s how to spot the next big thing
Most people think of Amazon as a retailer. That’s true in some sense, but it misses the big picture. In reality, the company is simply a middleman, facilitating transactions between buyers and sellers. Analysts call it an aggregator.
“Because aggregators deal with digital goods, there is an abundance of supply. That means users reap value through discovery and curation, and most aggregators get started by delivering superior discovery,” explained Ben Thompson, author of Stratechery.
Once businesses like Amazon get on the first rung of the growth ladder, the sky is the limit.
“Once an aggregator has gained some number of end users, suppliers will come onto the aggregator’s platform on the aggregator’s terms, effectively commoditizing and modularizing themselves,” Thompson added. “Those additional suppliers then make the aggregator more attractive to more users, which in turn draws more suppliers, in a virtuous cycle.”
Brick-and-mortar competition can never catch up. They have strict constraints like floor space, inventory, and geographical presence. By shifting the retail model to digital, Amazon was able to amass a self-fulfilling scale that contributes to its growth to this day.
This stock is the next Amazon
If there’s a lesson to be learned here, it’s to ditch physical products for software. Businesses that do this unleash growth potential unlike ever before. This is exactly what BlackBerry (TSX:BB)(NYSE:BB) has done.
Surprised? Many still think of the company as a smartphone manufacturer. Phones are physical hardware, akin to running a brick-and-mortar retail store. That put a tight lid on growth, pushing BlackBerry to reinvent itself in the image of Amazon.
Today, BlackBerry doesn’t produce a single phone. Instead, it owns an industry-leading portfolio of cybersecurity products, targeting high-growth markets like IoT, autonomous vehicles, and more.
This isn’t an early-stage play either. BlackBerry’s QNX platform, for example, is installed in more than 150 million cars worldwide, providing real-time protection from cyberattacks. Its Cylance division uses next-gen AI to thwart attacks before the attack has begun. This is seriously cool stuff.
Should you buy right now?
When Amazon focused on its aggregator model, the stock took off. The same is about to happen for BlackBerry. It’s made the incredible transition from hardware to software, yet the market hasn’t caught on yet.
CrowdStrike is one of BlackBerry’s cybersecurity peers. Shares trade at 65 times sales. BlackBerry, meanwhile, trades at just seven times sales. Expect this gap to narrow over time, leading to major gains for patient investors.
These valuation jumps aren’t unheard of. For years, Amazon shares traded under two times sales. Right now, they’re more than double that valuation, with organic growth adding even more profit.
BlackBerry should emulate this rise, benefiting from valuation tailwinds and traction with organic growth.
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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. David Gardner owns shares of Amazon. Tom Gardner owns shares of CrowdStrike Holdings, Inc. The Motley Fool owns shares of and recommends Amazon and CrowdStrike Holdings, Inc. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Fool contributor Ryan Vanzo has no position in any stocks mentioned.