If you want to drive huge gains, you have to find huge trends with true staying power.
Every investor wants big gains. But, not every trade pans out as hoped. Plenty of “surefire mega-winners” end up crashing and burning because their risks are underestimated while their upsides are overblown. Names like action-camera maker GoPro or meal kit company Blue Apron (now owned by Wonder Group) come to mind. At one point both stocks were all the rage. Then reality struck, upending each of them.
Those flops don’t necessarily mean you have to give up hope on finding a mega-winner though. It just means you need a stricter set of criteria, searching for companies with a superior product or service doing business in proven, sustainable growth markets.
To this end, here’s a closer look at three stocks that could turn a $1,000 investment in them into a $5,000 holding in a matter of years. In all three cases, most investors aren’t seeing an important detail about their respective businesses, or aren’t looking far enough into the future.
You likely know companies like Nvidia, Intel, and Dell Technologies make the technological brains found within a data center. But have you ever thought about who assembles all of this equipment into a final, functioning product? It’s not Dell or Intel. Companies like Super Micro Computer (SMCI -4.84%) handle this work. And there’s plenty of it.
Super Micro Computer describes itself as “a leading provider of application-optimized, high-performance server and storage solutions that address a broad range of computational-intensive workloads.” It goes on to explain its “server Building Block Solutions coupled with extensive in-house design and manufacturing enables the company to rapidly develop, build, and test server and storage systems, subsystems, and accessories with unique configurations.”
In other words, while a customer may want to utilize a specific brand of computer processors in its data centers, that organization actually calls Super Micro Computer to make it happen. Genesis Cloud chose Super Micro to help build its new machine-learning apparatus using Nvidia’s purpose-built HGX100 artificial intelligence (AI) processors, for instance. Web-hosting outfit Absolute Hosting tapped Super Micro Computer to build its network of virtual private servers around Advanced Micro Devices’ EPYC processor.
And business has been good. Last quarter’s top line of $2.1 billion was up 14% year over year, extending a long streak of comparable growth. Earnings are growing accordingly.
Now take a step back and look at the bigger picture. As much as the artificial intelligence and cloud computing markets have grown in just the past few years, they’ve still only scratched the surface of their eventual size. Technology market research outfit IDC believes the cloud computing and storage infrastructure market will grow by more than 11% per year through 2027, while Straits Research expects the artificial intelligence infrastructure market to expand at an average pace of nearly 21% through 2030.
Both tailwinds of course bode well for Super Micro Computer attracting sustained investor interest, particularly in light of its competitive edge. That is, it’s honing in on one of the fast-growing AI market’s unexpected challenges. As CEO Charles Liang explained during the company’s fiscal 2024 first-quarter earnings call, “Our high power efficiency systems, free-air and liquid-cooling expertise has become one of our key differentiators of success.” It matters since, as Liang adds, “I anticipate that up to 20% or more of global data centers will transition to liquid-cooled solutions in just a few years.”
Amazon (AMZN -1.53%) is the Western Hemisphere’s dominant e-commerce name. This dominance isn’t the reason Amazon shares could generate 400% returns by 2030 though. In fact, rising operating costs and improving competition somewhat threaten the company’s online shopping market leadership.
Rather, the reason to take a shot on Amazon stock right now is the potential it has on a couple of other fronts. One of these opportunities is the aforementioned cloud computing.
In terms of revenue, e-commerce and digital content services (like video and music streaming) are Amazon’s biggest businesses, accounting for more than 80% of its top line through the first three quarters of the year. That’s not the case for operating profits, however. Although Amazon’s cloud computing arm, Amazon Web Services (AWS), only makes up 16% of the company’s revenue, this business drives nearly 74% of Amazon’s operating profits. This income should more or less grow in step with the cloud computing market’s growth.
And the other investment-worthy opportunity? While profit margins on e-commerce may now be under permanent pressure, Amazon is changing its business model in a subtle but significant way. That is, it’s getting serious about advertising. Web traffic to Amazon.com is so strong that it now makes sense to allow its third-party sellers to pay Amazon to feature their products. The company did $12 billion worth of advertising business last quarter, but Insider Intelligence believes this full year’s advertising revenue tally of $44.9 billion will reach $67.6 billion as soon as 2025.
This is high-margin revenue, too, simply leveraging the traffic Amazon.com is already drawing.
Given these initiatives and their current growth trajectories, Amazon’s current annualized revenue of $550 billion could readily swell to well over $1 trillion. Net income could grow at an even faster clip as the company’s more profitable cloud computing arm becomes a bigger piece of the business, expanding from around $20 billion now to on the order of $100 billion by 2030. Amazon shares will likely follow the lead of that prospective quadrupling of the company’s bottom line.
Last but not least, put Symbotic (SYM 40.15%) on your watch list of stocks that could turn $1,000 into $5,000 by 2030.
It’s not a household name, but there’s a good chance you or someone living in your household has benefited from Symbotic’s products. The company makes robotics solutions, specializing in warehouse automation. Its customers include Walmart, Target, and Albertsons just to name a few — all companies that are ramping up their e-commerce operations at the same time they’re looking for greater cost efficiency. Symbotic helps in both ways, leveraging artificial intelligence to do what once required humans to handle in a less efficient way.
Some investors may recall robotics was something of a hot-button issue a couple of years before the COVID-19 pandemic, promising growth that forever seemed around the corner. Then the pandemic took hold, further delaying the realization of the tech’s potential. Interest in the technology has seemingly withered away in the meantime, for investors as well as its next batch of users.
It’s an opportunity, however, you may want to put back on your radar even if most other investors haven’t.
See, with a handful of usage cases now proving the potential of this inventory-handling solution, would-be customers are becoming interested again. Indeed, market research outfit LogisticsIQ believes the warehouse automation market is set to grow at an average annualized pace of 15% between now and 2028, while Mordor Intelligence puts the growth rate figure closer to 16%.
Symbotic is clearly capitalizing on this market’s growth too, and then some. Last quarter’s top line of $392 million crushed the year-ago comparison of $244 million as well as analysts’ consensus estimate of just under $307 million. But that’s still just the beginning. The analyst community expects Symbotic to be doing $2.5 billion worth of business by 2025, with some analysts calling for a top line of $4.0 billion in 2026. That’s more than three times its top line of $1.1 billion for its recently completed fiscal year.
The real story here not enough investors are seeing yet, however, is the bottom line. The company’s been in the red for most of its existence, but now with enough scale and enough market growth ahead, sustainable profits are in sight. Symbotic swung to an EBITDA profit of $13 million for the quarter ending in September, in fact, and analysts expect the company to sustain this trend, turning last fiscal year’s per-share loss of $0.37 into a profit of $0.04 this year en route to earnings of $0.57 per share next fiscal year.
Trading around $52 per share, Symbotic’s present price doesn’t even come close to reflecting the company’s potential profits come 2030. A bottom line in the ballpark of $2.00 (or maybe even more) per share by then isn’t out of the question.