The top growth stocks have consistently outperformed other types of stocks over the past decade, and they have done so with relatively little risk to the downside. Most of these growth stocks have been a wild ride since the pandemic era, and the volatility could continue well into 2024 if recession fears turn out to be correct.
After the rally earlier this year, most growth stocks are also no longer bargains. But I believe there are still some surefire bets investors can buy for potential multi-bagger gains by 2030.
Here are three options for investors looking for growth stocks with vast upside potential over the medium-term.
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Upstart (NASDAQ:UPST) is an AI-based lending platform that gained a lot of popularity during the boom in 2021. However, with the Federal Reserve pursuing higher interest rates and banks facing shocks this year, not many banks are comfortable lending using the platform. That’s mostly because banks are tightening their lending policies and focused on reducing risk.
However, Upstart’s model outperforms other credit scoring models such as FICO when it comes to assessing an individual borrower’s risk level. Thus, lenders looking to lower their risk may want to consider Upstart over the long-term. That’s why I previously said that most of Upstart’s disappointments are not really an Upstart problem, but rather a problem with the banking sector as a whole.
Upstart’s revenue declined 67% year-on-year to $103 million, and losses came in at $38.7 million for Q1. However, the company believes sales will bounce back to $135 million in Q2, with losses holding steady. Thus, it will require some patience before UPST stock recovers.
Not all banks trust AI to determine credit risk, but that will certainly change in the coming years, especially when the monetary policy eases up. I think this company could show explosive growth by the end of the decade, and become highly profitable as the banking landscape shifts toward risk mitigation.
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Snapchat (NYSE:SNAP) is another candidate that I see having a much higher value in 2030, considering the depressed level this stock currently trades at. Indeed, SNAP stock has seen no recovery since its selloff in late-2021, while many of its peers have rallied substantially since the start of the year.
That mainly has to do with Snapchat’s setbacks in expanding its average revenue per user (ARPU). Compared to other social platforms, Snapchat’s ARPU of $2.53 looks abysmal, much lower than it was in 2021. This is primarily due to a deteriorating advertising market. This low ARPU impacts the company’s overall revenue and profitability outlook. Accordingly, with Snapchat posting its first revenue decline since going public, many investors may not necessarily view this stock as the growth company it once was.
However, the ad market is slowly recovering, and Snapchat has many ways it can increase its ARPU. I’m looking for the company to increase the prevalence of its ads, or add more in-app purchase options for users. The company’s daily active user base is still increasing, and Snapchat is far from capitalizing on its 383 million users. Thus, I see SNAP being valued much higher in 2030.
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Cloudflare (NYSE:NET) is a cloud-based cybersecurity company that has yet to recover. It is used by most new websites worldwide, since it is easy to set up and provides reliable protection against a range of threats a website could face. Some major websites like Discord, Medium, Fiverr (NYSE:FVRR), and Udemy (NASDAQ:UDMY) rely on Cloudflare.
The company’s sales growth has been consistent and impressive, despite the slowdown seen over the past few quarters. Cloudflare grew its revenue 36.7% in Q1, and its projected 3-5 year revenue growth rate stands at 31.2%, according to Gurufocus. That’s better than nearly 94% of its peers.
Of course, Cloudflare is still far from being the profitable company investors want. But I would not say that the stock deserves to linger at such a low valuation, as it is still in its early stages of growth.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.
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