For investors with a penchant for growth-oriented businesses, to say it’s been a tough year would be a notable understatement. Yet even in a volatile market, the new year is still a great time to keep investing in businesses with strong growth stories.
In fact, if you have the capital to put to work, these down periods have proven time and time again to be some of the most compelling buying moments to scoop up companies with superior upside potential at discount prices. Here are three such stocks to consider adding to your portfolio in January.
1. Upstart
The market hasn’t been kind to Upstart (UPST) in recent months, but that doesn’t negate the impact the company can continue to have on the dynamics driving the broader lending industry, a market valued at just shy of $8 trillion globally as of 2022. The company acts as an intermediary between consumers and lenders, using its proprietary algorithm to assess risk of default and determine whether to approve or deny loan applications.
Upstart uses many different factors apart from the usual FICO score to evaluate an applicant’s creditworthiness, and 75% of all loans processed through its platform are done so on a fully automated basis. The company’s revolutionary platform and algorithm can significantly expand credit access to additional groups of consumers — thereby increasing potential profits not only for lenders but for Upstart — as many potentially financially responsible consumers have been left out of the market in the past simply because they didn’t have a sufficient credit history.
From small business loans to auto loans to traditional personal loans, Upstart is rapidly growing its offerings and expanding its partnerships with banks and credit unions across the country. At the end of the last quarter, its network of lending partners had jumped to 83 nationwide, a 170% increase from the same quarter in 2021. While overall loan volume was down as fewer consumers are seeking credit, interest rates remain high, and its institutional partners are more cautious about funding loans, Upstart’s small business loan volume jumped to $10 million in the third quarter of 2022, up from $1 million in the quarter preceding it.
For investors willing to ride out out the difficulties of the current lending environment, the power of Upstart’s platform and its growing network of lending partners can pack a serious punch for this fintech stock and its shareholders in 2023 and well beyond.
2. Amazon
Amazon (AMZN) has been a household name for decades, and the company has proven its ability to disrupt markets from retail to cloud computing to entertainment throughout the years. Even so, some investors have stayed away from the stock in past months as part of the broader market blight afflicting tech-oriented and growth businesses continues.
The company is still one of the top e-commerce platforms in the world. In the U.S. alone, which is the second-largest e-commerce market in the world behind China, roughly 40% of all online retail sales occur on Amazon’s platform. The company is continuing to seize share of the global streaming market, and has amassed such a sizable share in the U.S. that it is second only to Netflix. Meanwhile, Amazon Web Services, the company’s cloud services segment, is not only the top cloud infrastructure platform in the world, but saw revenue growth of nearly 30% in the most recent quarter.
In the first nine months of 2022, Amazon generated total net sales of $365 billion, a 10% increase compared to the same period in 2021. The company also generated about $10 billion in operating income in the first three quarters of 2022.
Although growth slowed in recent quarters, Amazon shows the resilience of its business in myriad ways. For long-term investors with the appetite to ride out near-term volatility, this could present an incredible opportunity to snatch up shares of this company at a serious discount.
3. Shopify
Shopify (SHOP) made what was once a highly complex concept — launching and growing a brand — easier than it’s ever been. From integrations with suppliers, payment processing apps, and inventory management apps, to supply chain management, Shopify has become an indispensable tool to millions of merchants around the world who want to establish and maintain their own business.
In the most recent quarter, Shopify saw a 22% jump in revenue from the year-ago period to $1.4 billion, while revenue growth was up 52% on a three-year basis. There were a variety of catalysts behind this solid clip of growth. One key catalyst was a surge in merchant solutions revenue.
Shopify is continually upgrading the suite of tools and services at the disposal of the business owners who leverage its platform, and the addition of Deliverr to the Shopify Fulfillment Network earlier in 2022 is a prime example.
In fact, management noted in the most recent earnings call that the business witnessed “80% growth quarter over quarter in the number of merchants using more than one of our logistics services across all three stages of the supply chain.”
Shopify differs from a store like Amazon in that it isn’t one central platform on which merchants list goods and connect with consumers. Instead, Shopify provides the back-end tools, software, and hardware solutions designed to promote the success of every kind of retail store and enable business owners to create a brand that’s entirely their own. This advantage is one that few companies have or can come close to competing with, creating a notable buying proposition for shrewd investors in the current market seeking a supercharged long-term growth story.
— Rachel Warren
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Source: The Motley Fool