Well-chosen growth stocks could help you earn a fortune in the stock market. The challenge, of course, is being able to identify the businesses that are best positioned to profit from powerful long-term trends in fast-growing industries.
To help you in your search for the best growth stocks, here are three rapidly expanding companies that are poised to deliver wealth-building gains to their investors.
As we enter the age of artificial intelligence (AI), data is the new gold. Those who can collect and process it effectively will grow richer, while those who don’t will fall behind. Snowflake (SNOW) helps its customers glean valuable insights from a vast range of otherwise siloed and often unattainable data sources. Demand for the cloud tech company’s services, in turn, is soaring.
Snowflake’s revenue rocketed 67% year over year to $557 million in its fiscal 2023 third quarter, which ended on Oct. 31. New business wins and higher sales to existing customers drove the gains. Snowflake’s customer base grew by 34% year over year to 7,292, while its net revenue retention rate checked in at a remarkable 165%.
Yet despite this torrid growth, Snowflake has a long runway for expansion still ahead. Management pegs its total addressable market — which spans across high-demand areas like data storage and analytics, machine learning, and cybersecurity — at a whopping $248 billion.
It should be noted that Snowflake is not yet profitable based on generally accepted accounting principles (GAAP). But it is on pace to convert roughly 20% of its revenue into free cash flow in fiscal 2023.
Moreover, Snowflake’s profit margins should continue to improve as it scales its operations. In fact, management estimates that Snowflake’s operating margin could climb as high as 20% by 2029. Investors who buy shares today can position themselves to profit alongside this cloud data leader.
2. SoFi Technologies
Banking is going digital. Online personal finance company SoFi Technologies (SOFI) is helping to further this trend in the massive consumer lending market. The digital bank, in turn, is growing at a rapid clip.
Customers are flocking to SoFi’s high-interest checking and savings accounts. SoFi added nearly 480,000 new members in the fourth quarter alone. It ended 2022 with over 5.2 million total members. That’s up 51% compared to 2021.
This impressive customer growth swelled the bank’s deposit base to more than $7.3 billion. These deposits are lowering SoFi’s funding costs for its loans and, by extension, boosting its net interest margin.
All told, SoFi’s net revenue surged 60% to $1.6 billion in 2022. Like Snowflake, SoFi is not yet profitable on a GAAP basis. But its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared by 374% to $143 million. Better still, SoFi is on track to achieve GAAP profitability by the fourth quarter of 2023, according to CEO Anthony Noto.
As a leading digital bank, SoFi is well-positioned to capture a larger share of the multi-trillion-dollar financial services industry. Investors who buy its stock today stand to profit handsomely as it works to fulfill its tremendous growth potential.
Few industries are forecast to grow as rapidly as electric vehicles (EVs). As the dominant EV maker, Tesla (TSLA) stands to benefit from this trend more than perhaps any other business.
Closely followed fund manager Cathie Wood is ardent Tesla bull. In their Big Ideas 2023 report, Wood’s analysts at Ark Investment Management laid out their case for why they believe EV sales will increase by a staggering 50% annually to 60 million units by 2027, driven by declining battery costs and vehicle prices.
Even if Ark’s estimates prove overly optimistic, Tesla clearly has an enormous market opportunity. The automaker expects to manufacture 1.8 million vehicles in 2023, up from 1.3 million in 2022. That’s still just about 3% of what Wood and her team believe the EV industry’s unit sales could approach in the coming years.
Tesla’s recent price cuts should help to fuel its growth. “Thus far in January, we’ve seen the strongest orders year-to-date than ever in our history,” CEO Elon Musk said when referencing the impact of these price changes during the company’s earnings call on Jan. 25.
Importantly, Tesla’s industry-leading margins have allowed it to reduce vehicle prices and still remain highly profitable. The EV giant’s sales jumped 51% to $81.5 billion in 2022, while its operating income more than doubled, to $13.7 billion.
Tesla’s brand strength, financial fortitude, and relatively low-cost production network should allow it to maintain its leading share of the booming EV industry. These powerful competitive advantages also make the EV leader’s stock a solid buy today.
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Source: The Motley Fool