For more than 18 months, the benchmark S&P 500 has been virtually unstoppable. After the index’s fastest decline of at least 30% in the history of the index, its value has since doubled, with growth stocks leading the charge higher.
But not all high growth companies have moved with the broader market. There are many large companies that are currently trading at steep discounts from their 52 week highs, providing a substantial advantage to patient investors. The following five discounted growth stocks all have the capacity to turn a $ 200,000 investment into $ 1 million (or more) by 2030.
Pinterest: Down 44% from 52-week high
A newcomer to social networks Pinterest (NYSE: PINS) has been pummeled since late July, when the company announced a sequential quarterly reversal in its monthly active user growth (MAU). In total, Pinterest had MAU 454 million, up from MAU 478 million in the first quarter. But if you look at the historic growth of Pinterest’s MAU over three years or more, you’ll see that a fluctuation in a single quarter doesn’t change the company’s growth trajectory.
What’s much more important to recognize is that Pinterest’s relatively slower growth in the second quarter did not change the desire of advertisers to reach these users. Average revenue per user (ARPU) grew 89% globally in the quarter ended June, with ARPU growing 163% internationally. International ARPU could double several times this decade, which should allow Pinterest to maintain double-digit sales growth throughout the decade.
Another thing that is often overlooked with Pinterest is that its user base can be better targeted than any other social media platform. With users willingly sharing the things, places, and services that interest them, Pinterest simply needs to keep their MAUs engaged and connect them with merchants who specialize in their interests. This ability to target specific users should give Pinterest exceptional ad pricing power.
Jushi Holdings: Down 53% from 52-week high
In the cannabis space, the small-cap US multi-state operator (MSO) Jushi Holdings (OTC: JUSHF) has all the tools to quadruple (or more) value by 2030.
If you are wondering why marijuana stocks have gone up in smoke in the past seven months, look no further than disappointment that Congress has not passed any cannabis reform. Nonetheless, with 36 states having legalized cannabis to some extent, Jushi and his peers have more than enough opportunities to thrive without federal action.
What makes Jushi such an intriguing pot stock are his three states: Pennsylvania, Illinois, and Virginia. These three states have a sales potential of $ 1 billion and they are all limited license markets. Pennsylvania and Illinois are deliberately capping the number of retail licenses they will issue in total and to a single company, while Virginia assigns licenses by jurisdiction. With only 24 dispensaries in operation right now, Jushi is looking for potentially wealthy markets where regulators are deliberately limiting competition. That way, he can grow his brands and a loyal following without being overwhelmed by an MSO with deeper pockets.
It’s also worth pointing out that $ 45 million of the first $ 250 million in capital raised by the company came from executives and insiders. When the interests of executives and insiders align with those of shareholders, good things tend to happen.
EverQuote: Down 66% from 52-week high
Insurance is far from an exciting industry. However, the online insurance market beaten Never quote (NASDAQ: NEVER) tries to make buying insurance less complicated for consumers and their customers (insurance companies).
According to EverQuote, the US insurance distribution and advertising market is expected to grow 4% per year through 2024. Meanwhile, digital insurance advertising is expected to grow 16% per year over the same period. EverQuote operates strictly in this digital realm.
The bulk of the company’s revenue comes from its auto insurance market, which is in partnership with 19 of the top 20 auto insurers. It allows consumers to quickly compare policy prices and buy them in its marketplace. About 1 in 5 users who get a quote on the platform will buy a policy. The key point here is that instead of insurers throwing advertising dollars at large and potentially unqualified audiences, EverQuote brings them highly motivated consumers and thus gives them more bang for their advertising dollars.
To get started, EverQuote is entering new insurance verticals. In addition to auto insurance, it offers commercial, health, life, home and tenant insurance. These new verticals represent a smaller percentage of total sales, but they are growing faster than the automotive market and will play a key role in increasing EverQuote’s valuation.
Racine: Down 82% from its 52-week high
Another innovative small-cap growth stock with the potential to turn a $ 200,000 investment into $ 1 million by the end of the decade is the insurance company. Root (NASDAQ: ROOT). Although it has lost over 80% of its value since its inception as a public company, Root’s unique approach to pricing insurance policies could be a game-changer.
Traditional auto insurance companies use general metrics to price their policies, including credit score and marital status. Unfortunately, these measures do not give insurers key information: whether someone is a good driver or not. Root, on the other hand, relies on telematics to price its auto policies. It relies on very sensitive instruments found in smartphones, such as the accelerometer and gyroscope, to understand the G forces of turning, braking and acceleration. In other words, Root can price policies based on how people drive before purchasing a policy.
Of course, this new technology is still in the works. It initially showed a lower than expected direct loss ratio in the first quarter of 2021, but reversed in the sequential second quarter. Nonetheless, this loss ratio has consistently been below 100% since the start of 2020, demonstrating that Root can underwrite profitable policies.
While investors envision significant short-term losses as the company ramps up its digital marketing campaign, Root’s unique approach could make the company a big winner by 2030.
PubMatic: Down 66% from 52-week high
Last but not least, small cap ad technology stocks PubMatic (NASDAQ: PUBM) could reasonably turn $ 200,000 into $ 1 million (or much more) by 2030.
If you missed the dominant trend in the EverQuote discussion above, let me reiterate that advertising is going digital. While we never see billboards or print advertisements disappear, it is becoming more effective than ever to reach users online. This is where PubMatic comes in.
PubMatic is a sell-side programmatic advertising platform that uses machine learning algorithms to optimize ad placement for its clients. Or in simpler English, PubMatic is for publishers looking to sell their poster space. It aims to optimize ad placement for users, which satisfies readers and advertisers, and tends to increase the pricing power of display for business publishers. Obviously, it works, as the company’s existing publishers spent 50% more in the quarter ended June than in the second quarter of 2020.
In addition, we are still in the early stages of this digital shift. While PubMatic experiences industry-wide digital ad sales annual growth of 10% through 2025, it is consistently doubling the industry growth rate. In fact, most of PubMatic’s growth is expected to come from connected TV and over-the-top programmatic advertising, which is one of the fastest growing niches in the digital advertising space.
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