5 growth stocks that are climbing my list of potential purchases

0


I don’t buy a lot of stocks. But with so many amazing companies trading in the public markets, there is a lot that I want to to buy. There are many factors that need to be in place for me to hit the buy button: the right allocation to pay me first, an emergency fund, and funds available to invest. In addition, the stock must meet my criteria.

I love growth stocks. Not only because they usually offer the greatest reward for my investment, but because they are exciting. They usually have a big impact on the world, changing the way people think and operate. These are five stocks that rise in my list of potential purchases, in no particular order: Fiverr International (NYSE: FVRR), Square (NYSE: SQ), Roku (NASDAQ: ROKU), Airbnb (NASDAQ: ABNB), and Holdings reached (NASDAQ: UPST).

Image source: Getty Images.

Fiverr: A better independent model

There are several companies that serve the freelance community and put companies in touch with suppliers. Fiverr stands out for me by its differentiated model of SAAP, or service-as-a-product. I have used freelance websites in the past when building my financial writing portfolio. I love Fiverr’s model, where salespeople present their services in the form of gigs or packages with fixed prices for their work. This makes the buying process simple and straightforward, and this is one of the reasons why Fiverr has enjoyed explosive success.

Last year was a bumper year due to the pandemic and home orders. Revenue increased 77% year-over-year, gross margin widened and net loss was halved. Growth has slowed in 2021 as people return to offices, but it remains strong, with sales up 60% year-over-year in the second quarter and an increase of around 50% expected for the second quarter. whole year.

The other reason I see so much potential for Fiverr is the focus on innovation. The company has implemented many upgrades and additions to its services, including a fee-based premium seller program, training program for jobs directly with Wix.com and Salesforce.com, and a business program for larger clients. Management sees an addressable market of $ 115 billion, which gives it plenty of room to grow.

After huge gains in 2020, Fiverr stock has risen 15% in the past year, only about half of the gain in the S&P 500, and it is still trading at a whopping 26 price / sell ratio. Is there enough growth potential to justify this premium? I think this is a buy and hold situation, where investors will have to wait for the company to catch up with the share price, and over time patient investors will see high gains. .

Square: one-click financial services

FinTech, or financial technology, has made strong inroads into just about every type of financial service available today. It has become popular because it simplifies many processes that are heavy in their traditional models, such as banking and stock exchange.

When customers use Square’s Cash app, they can perform a multitude of functions, including its original peer-to-peer payments and Bitcoin trading, with the click of a button. It’s easy to see why this is appealing, and Cash App revenue grew 177% in the second quarter. Overall revenue, which includes vendor activity, increased 143% during this period.

As Square adds functionality to its Cash app, it drives higher engagement, higher sales, and higher profits. The company established a bank in March, which forms the basis of its savings accounts, and will also be the backbone of a new small business banking platform for its salespeople. The opportunities are huge as he enters this new space. It is also growing the seller business and recently announced a deal with social media video company TikTok to have business customers feature shop pages in their TikTok videos.

Square has been a powerful investment, and its stock has gained nearly 2,000% over the past five years. It is trading at a huge valuation of over 200 times the earnings of the past 12 months, but it continues to grow and has tremendous potential.

People seated at a table with computers wearing masks.

Image source: Getty Images.

Roku: Streaming is the New TV

Who says people don’t want to see ads on their streaming service? Despite the prevalence of paid streaming subscription companies such as Netflix and DisneyDisney +, Roku has created its own niche with its ad-supported on-demand streaming site, Roku Channel. According to its annual survey with the National Research Group, Roku is the # 1 TV streaming site in the US for hours of streaming.

Advertising is the main driver of business growth as advertisers shift their money to streaming, and the platform’s revenue grew 117% in the second quarter year-over-year. Gamer revenue, or sales of its devices, grew 1% as the company deals with supply chain issues.

Roku seizes the opportunity by launching Roku Originals, its own original content. It will produce over 75 new pieces of content this year to compete with the leaders, and so far management has said the response has been “overwhelming.” The annual survey showed that 73% of respondents said getting access to a new movie release is a reason they would try a new streaming service, and having fresh content is a way to attract new viewers. as well as more advertisers. As the audience and streaming hours increase, the company opens up a huge opportunity.

Roku stock has been roughly flat since the start of the year, and it’s trading at an expensive valuation of 244 times one-year futures earnings. It’s expensive, but I find the growth prospects convincing.

Airbnb: personalized travel experiences

Airbnb is everything traditional travel isn’t: unique personalized experiences, with each residence being different. It can also be cheaper and offers a much wider assortment of rentals in terms of size, type and location. And this is where it’s hard for hotels to compete, as Airbnb can expand its rental collection without laying a single brick.

That’s why the company is showing tremendous growth, with an almost 300% year-over-year sales increase in the second quarter and an almost 200% increase in room nights and booked experiences. It is much more than a pandemic rebound.

Management sees an addressable market of $ 115 trillion, including a fraction of $ 1.3 billion in second quarter revenue. With its growing list of vacation rentals and travel innovations such as unique experiences, it has the potential to gain greater market share. It is still posting a loss, but it narrowed in the second quarter, and as the business matures, its platform should do the heavy lifting while Airbnb turns sales into revenue.

Airbnb went public last year and its stock is up about 18% from its initial public offering after falling from early 2021 highs. It is trading at a P / S ratio of 23, which makes it expensive. But I think Airbnb has a huge growth avenue and great potential for stock market gains.

Upstart: Data Driven Financing

Upstart is definitely in the running for the 2020 IPO with the biggest gains. The company provides banks with a platform to assess customer risk based on over 1,600 data points, resulting in more approvals (71% of them instant) and less risk.

The company says 80% of Americans have never defaulted on a loan, but only half can get the credit they need based on traditional credit scoring systems. It is a losing situation for customers and banks.

It’s easy to see why Upstart’s sales are soaring. Revenue increased more than 1,000% in the second quarter of 2021 and net income reached $ 37 million compared to a loss in the second quarter of 2020.

Upstart sees a huge opportunity, with more than $ 4 trillion in credit issued from June 2020 through June 2021, according to TransUnion. There were $ 635 billion in loans during this period, and the company recently entered the auto loan business with Upstart Auto Retail. It is already operating in 47 states and can add huge volume to the Upstart platform.

At the time of writing, the stock has gained over 950% since its IPO less than a year ago. This gives it a forward P / E of 223, a high valuation. But there is so much more room to grow, and investors shouldn’t make the mistake of thinking the gains are over.

I really like all of these stocks and their growth prospects. They are all quite expensive, but they all meet the needs of customers in a changing environment. When I am ready to buy, it will be difficult to choose one.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


Leave A Reply

Your email address will not be published.