Albert Einstein is widely credited with calling compound interest the most powerful force in the universe, and it’s easy to see why. A few big winners can energize your portfolio and set you on the path to financial independence. For example, $ 100 invested in a stock that doubles becomes $ 200; but at this point the stock price only needs to rise 50% to add another $ 100 to the total. In other words, the baseline changes as the stock price rises, which means you start to make money on your earnings.
However, the magic of composition doesn’t happen overnight. It takes patience and a long-term mindset. Based on that idea, we asked three Motley Fool contributors to pick tech stocks that could triple in the next five years. Read on to see why CarParts.com (NASDAQ: PRTS), CrowdStrike Holdings (NASDAQ: CRWD), and Teladoc Health (NYSE: TDOC) made the list.
An underrated ecommerce game
Jeremy Bowman (CarParts.com): E-commerce has been the source of many monster stocks. From the bunch, Amazon is the best known, but companies like Free Mercado, Shopify, Etsy, and Wayfair have all made investors richer as online retail continues to take hold of traditional channels.
This is one of the reasons why investors should take a closer look at CarParts.com. If you’re looking for stock that could triple in the next five years, pure-play auto parts e-commerce stock could be. CarParts.com currently has a market cap of less than $ 1 billion, but pursues an addressable market worth $ 500 billion. As large e-commerce companies have done before, CarParts.com is helping the auto parts market shift from physical sales to e-commerce.
The company aims for long-term revenue growth of 20-25% and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, a margin of 8-10%. Recent growth has been strong, but demand has exceeded supply. The company is addressing this by expanding a warehouse in Texas, opening one in Florida and adding another in the northeast next year. The company now has over a million square feet of warehouse and growth space, and each new expansion helps shorten delivery times and improve inventory and selection, creating a virtuous circle. which attracts more customers to its ecosystem.
As the direct tailwinds of the pandemic may fade, the average age of a car on the road in the United States is now 12 years old, which means demand for spare parts will be high in the future. predictable. The company is also beta testing a mobile mechanic, sending someone to your house to install the parts you ordered from CarParts.com, another sign of its potential as a disruptor.
The stock also has the potential to be a threesome as it’s still affordable at a price / sell ratio of less than 1.5, giving it plenty of room for multiple expansion. If CarParts.com can keep its long-term forecast, its inventory should be considerably higher in a few years.
Strike while the iron is hot
Eric Volkman (CrowdStrike Holdings): CrowdStrike is hardly the cheapest stock, either at the gross level of the stock price or in terms of valuation. But he is an efficient and much admired operator in a hot industry that will scorch for years to come. So I’m convinced it can be triple bagging, however high its current numbers are.
CrowdStrike is a cybersecurity company whose anchor product, the Falcon Security Platform, is a cloud-based solution. There are a host of advantages to this. Importantly, it enables relatively quick and painless adoption by customers, who benefit from not having to install and run traditional on-premise security solutions.
Another huge advantage is that the Falcon platform is modular. This not only makes it easy for customers to add functionality as their security needs increase, but also provides the business with fruit at their fingertips to increase revenue from those additions.
CrowdStrike also relies on the subscription model. This is attractive to investors because it provides the business with a stable income stream which is also sustainable.
The company attracts many customers. During the last quarter, CrowdStrike added 1,660 new net subscriptions, bringing the total to 13,080 customers. Meanwhile, the recurring subscription revenue that investors love accounted for almost all (93.5%) of the $ 337.7 million in total revenue for the period – which, by the way, was a strong 70% increase year over year.
Looking back the past few years, CrowdStrike has been a model of rapid revenue growth; from just under $ 53 million in 2017, the company grew to $ 874 million in fiscal 2021.
This is good, but some investors may be concerned about the lack of profitability of the business. Yes, CrowdStrike is still well in the red under generally accepted accounting principles (GAAP), but losses have been declining lately. In 2021, the loss of $ 93 million was a marked improvement over losses of over $ 130 million in the previous three years. This is largely because the company’s revenue growth now exceeds that of selling, general and administrative expenses, an encouraging sign.
Yet the company continues to invest capital in research and development, keeping it at the forefront of cutting-edge technology in a rapidly evolving field. This strategy seems to be working, as Falcon generally gets very high marks from users and other cybersecurity experts. The good reputation the company has built for itself should continue to attract customers who pay for subscriptions and add modules.
Trevor Jennevine (Teladoc Health): Teladoc is a technology-driven healthcare company. Its first virtual platform allows patients to make remote visits with clinicians, and its product portfolio ranges from general health and wellness to acute and chronic care.
Last year the pandemic put this business on the map; the stock price climbed 138% in 2020. However, the stock has underperformed the overall market this year and is currently 56% below its all-time high. What changed? Growth has slowed, so many investors have called Teladoc “pandemic action”, but I think that’s a mistake.
Teladoc makes healthcare cheaper and more convenient. In 2020, the median response time between a member’s request and a telehealth visit was only 10 minutes, which is less time than you might spend in the waiting room during a telehealth visit. traditional visit to the office (not to mention the round trip). And for general medical appointments, Teladoc customers save $ 472 per visit compared to alternatives, according to Veracity Analytics.
Last December, Teladoc acquired Livongo, a company specializing in chronic diseases such as diabetes, hypertension and mental health issues. The move expanded Teladoc’s expertise in chronic care and strengthened its position as the most comprehensive telehealth platform, but it also added new patient data to Teladoc’s artificial intelligence models. And over time, as it adds more members and collects more data, Teladoc’s AI models should continually deliver better outcomes for all patients on the platform, creating a network effect.
In the last quarter, membership growth slowed to just 1%, but that’s not surprising after the supercharged growth seen during the pandemic. Despite this, Teladoc has always delivered good financial results. The total number of visits climbed 28% to 3.5 million and the utilization rate reached 21.5%, up from 16% last year. As a result, revenue soared 109% to $ 503 million.
Teladoc is well positioned to maintain this momentum. Management assesses the company’s market opportunity at $ 250 billion, leaving Teladoc with plenty of room to grow its business. More importantly, the value proposition is clear: telehealth is more convenient and less expensive. And given its strong competitive position, Teladoc is expected to experience strong demand in the coming years. This is why this technological stock could triple by 2026.
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! Questioning 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.