To put Netflix (NASDAQ: NFLX) stock's performance into perspective, on its 15-year anniversary since going public in May 2002, a $1,000 investment would have grown to $140,000. That's an impressive run, to say the least. We challenged several Foolish investors to find stocks that look a bit like Netflix did way back when.
Three stocks, including Internet of Things upstart CalAmp (NASDAQ: CAMP), national-security provider Kratos Defense & Security Solutions (NASDAQ: KTOS), and online dating leader Match Group (NASDAQ: MTCH), all have the potential to generate Netflix-like results in the years ahead.
Right place, at the right time
Tim Brugger (CalAmp): With a market capitalization of $845 million, IoT upstart CalAmp may fly under a growth investor's radar. Though with its stock up 64% this year, there are obviously a few savvy investors who recognize that CalAmp is ideally positioned to continue its solid performance.
Why does CalAmp look a bit like Netflix back in the day? Because CalAmp's focus on delivering IoT solutions to connect, amass, and use business-critical data in the manufacturing and transportation industries is spot-on. By most accounts, those industries will lead IoT revenue growth for years to come.
Removing last year's $6.7 million revenue from its now defunct satellite unit, CalAmp's $89.77 million in revenue represented a 7.1% increase -- and with multiple new clients inked in the quarter, expect more of the same this quarter. CalAmp certainly does. At the midpoint of guidance for this quarter, CalAmp's $91.5 million in revenue would be a 10% jump over last year's $83.35 million.
Thanks to CEO Michael Burdiek's strict expense management -- operating expenses were flat year over year -- CalAmp's bottom line also benefited last quarter. Despite generating $500,000 less in net income from ceasing its satellite operations, CalAmp's adjusted per-share earnings of $0.27 equaled last year's earnings.
With the expected increase in revenue this quarter, CalAmp is getting its IoT ducks in a row. It's early, but the signs are all there: CalAmp is poised to ride the IoT wave long into the future, much like Netflix's streaming video has done since the company's IPO days.
Like Netflix, this company is evolving
Rich Smith (Kratos Defense & Security Solutions): I don't know that it looks just like Netflix at its IPO, but in several important respects, Kratos Defense & Security does bear more than a passing resemblance.
For example, after several years of losing money, Netflix was finally on the cusp of turning profitable by the time of its 2002 IPO. By 2003, Netflix would earn its very first full-year profit -- and it never looked back. (Last year, Netflix earned $187 million -- nearly 30 times more than it earned in that first profitable year). Kratos, too, has been losing a lot of money these past few years. But according to management, it could turn profitable again any day now. In fact, if things had worked out as planned, Kratos would have turned profitable last quarter.
And that's just the numerical similarity. Where I see an even stronger resemblance is in the two companies' respective visions for the future. When Reed Hastings set up Netflix in 2002, his was a simple business -- buy DVDs, and rent and mail them out to customers who wanted to watch them. But from the get-go, Hastings envisioned a day when customers could stream flicks over the net -- technology that was barely even feasible back then. Now that he's reached this point, the company has transformed.
Kratos has similarly high hopes to evolve from its role today as a maker of "dumb" drones used for aerial target practice, to much more advanced, jet-powered combat drones that will attack targets of their own. Several models of such combat drones are in the works already, and if Kratos succeeds with its plans, it could dominate an entire new field of aeronautics -- just as Netflix now dominates in video streaming.
A world of possibilities online
Jeremy Bowman (Match Group): At the time of its IPO, Netflix was just a small company with a big idea: disrupting home entertainment. In 2002, its business was just shipping DVDs by mail, but the company has successfully evolved since then by embracing video streaming and, later, original content. The huge market for home entertainment, and Netflix's leadership and success as a disruptor, has made the stock a big winner.
Like Netflix, Match Group has been around since the dawn of the internet, and the company has also changed significantly since then. While Match's early days were defined by its namesake brand, the proliferation of smartphones changed the online dating industry. Today, swipe-based app Tinder is its most valuable brand.
Tinder's explosive growth has fueled Match stock since its 2015 IPO, and the stock has surged nearly 50% since the company launched Tinder Gold in August, a feature that costs $5 a month and gives users the ability to pre-sort their matches based on who's already liked them.
As technology evolves, with things like augmented and virtual reality on the horizon, Match Group should be able to invent and develop similar features that will grow the business and make its products more popular. The need for love and relationships, like the desire for home entertainment, is universal and lasting. Like Netflix, Match Group is the leader and pioneer in an industry with huge potential. At a market cap of $7 billion, it's much larger than Netflix was at its IPO, but don't be surprised if the stock follows the streamer's trajectory.
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Jeremy Bowman owns shares of Match Group and Netflix. Rich Smith has no position in any of the stocks mentioned. Tim Brugger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool recommends CalAmp and Match Group. The Motley Fool has a disclosure policy.