Since 2020, many investors have developed exceptionally high expectations for the stock market due to the stunning performance of certain companies. Searing genetics (FLGT -3.04% )for example, gave investors over 763% returns from the start of 2020 to March 2021. Other stocks acted similarly, lulling many investors into a false reality where astronomical returns were the benchmark .
However, such skyrocketing stock prices are not typical. Over the past decade, the S&P500 provided 219% return to investors. Therefore, if investors want to turn $250,000 into $1 million in a decade, that would require strong, above-market returns of 300% (a four times gain), which is no easy task. Although it’s difficult, I see three companies that have a good chance of doing it.
Year ( AN -2.07% ) has certainly been a disappointing performer, dropping 68% over the past year. This is mainly due to short-term supply chain issues in the television industry. Roku is one of the leading consumer streaming platforms, allowing users to easily switch between their favorite streaming channels. However, due to supply chain issues in the United States, TV sales fell like a rock in the fourth quarter. This is a big deal for Roku. After all, if consumers can’t buy new, high-tech TVs, Roku can’t add potential customers.
That said, the company’s long-term vision is still on track. Roku sees a future where all TV is streamed and the shift from cable to streaming services like disney ( SAY 0.00% ) always evolving rapidly. According to Leichtman Research, major cable companies and other traditional pay-TV services lost 1.3 million customers in the third quarter of 2021, with the majority of those users turning to streaming services. Importantly, Roku is one of the streaming platform market leaders, with more than 60 million consumers using its platform as a hub for their streaming providers in Q4.
Many investors focus on the short term, which is why the stock price has been reduced. This has created an attractive prospect for long-term investors to obtain a high-quality business at a low price. Roku is trading at just over six times sales – its lowest valuation since the start of 2019. Roku would reach a value of $64 billion if its size grew four times from its current market cap of $16 billion. of dollars. That’s only marginally higher than the all-time highs it reached in 2021, so the idea that it could quadruple over the next decade isn’t out of reach.
2. Global-E online
Global-E (GLBE -3.95% ) also has the potential to generate strong returns over the next decade through its extremely valuable services for small and medium-sized e-commerce businesses (SMEs). The company provides services that help them manage the frictions faced by SMEs when selling their products internationally. This includes shipping, payment, language and currency barriers.
This assistance is in great demand and Global-E has benefited from it. In 2021, revenue soared 80% year-over-year to $245 million. It is important to note that as Global-E customers grow, they choose to continue working with the company instead of developing an in-house solution. The company’s net retention rate in 2021 was 152%, which means 2020 customers were spending 52% more than last year, and the churn rate was just 2%.
Global-E recently partnered with a leading e-commerce company, Shopify ( STORE -6.33% ), to offer its services to Shopify merchants. These merchants collectively generated over $175 billion in gross merchandise volume (GMV) in 2021. Global-E had less than $1.5 billion on its platform last year, so this is a a major opportunity for the company here.
To quadruple its size from here, the company would need to grow from the current market capitalization of $5 billion to $20 billion. But given the potential it has with Shopify and the impressive growth rates it currently has, it could be achievable within the next decade.
This artificial intelligence (AI) powerhouse has taken the personal loan industry by storm and has had remarkable success in disrupting the traditional way consumers get approved for credit. Reached ( UPST -4.33% ) takes into account more than 1,500 variables and more than 21 million repayment events to give a better determination of creditworthiness compared to traditional methods used by large banks.
By partnering with smaller banks and credit unions and getting paid per loan decision, Upstart can bring prime credit to more Americans while exposing investors to less credit risk than if it were to. itself create the loans.
Its AI was adopted quickly: in Q4 2021, the company made decisions on loans worth $4 billion, representing a 220% year-over-year increase. Despite this expansion, it’s peanuts compared to the total opportunity ahead. Upstart estimates its total addressable market, primarily personal and auto loans, to be worth $823 billion annually.
Most triple-digit growth companies have abysmal valuations, but not Upstart. It trades at six times forward sales. Given the potential size of the market it operates in and how quickly it matures, I wouldn’t be surprised if Upstart wowed investors over the next decade.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.