After an extraordinary year, it’s time for the holiday season. Some shareholders are probably thinking, “bah, humbug!” because of the combination of high inflation and rising interest rates.
However, investors who are more experienced than novices feel the joy of the holiday season. They remember that stock prices have fallen and they have gotten some great deals for the holidays. Many are busy making holiday wish lists and putting pen to paper for their high-growth stocks, which sell at bargain basement prices.
This list contains three stocks investors should be aware of as stocking stuffers for the year.
Stock investors should start investing in stock in 2022 to experience remarkable growth. Alphabet (GOOGL 1.68%) (GOOG 1.76%). Alphabet is a tech giant with several leading businesses in the industry, including Google search engine and Google Cloud cloud computing platform. YouTube also has streaming video platform YouTube. Although advertising revenue has suffered from businesses cutting back, Alphabet’s strong competitive advantage should be a reason to give Alphabet a gift.
Alphabet’s dominance in internet search is the foundation of its success. Google controls 92% of global search engine markets, and this share has not changed much over the years. Google’s search monopoly is also the foundation of its digital advertising business, which it controls 29% of global digital ads spending.
Google recognized the immense potential of YouTube’s short videos and was quickly rewarded. YouTube is No. Global Media Insight estimates that YouTube is the number one video streaming site worldwide with more than 2.6 billion people visiting the platform each month. Alphabet is always looking for ways to increase that revenue so YouTube should remain a long-term winner.
Google Cloud is the third-largest provider of cloud infrastructure, holding 9% market share according to Canalys. Google has a strong position to continue growing its market share for the next few years as digital transformation is just beginning.
Alphabet stock is now less than four times the next year’s sale. This is the lowest price Alphabet stock was in almost a decade.
The second, jaw-droppingly growing stock that investors should consider is Toast (TOST -0.17%). Toast is fast becoming an essential technology provider to the restaurant sector, even though it isn’t as well-known as Alphabet. Many restaurants struggle with a variety of software and hardware systems that allow them to process orders, pay staff, order inventory, schedule staff and process digital orders. Toast does all that and more, with a cloud-based, software-as-a-service (SaaS) platform that consolidates these tasks in one place using a single, integrated system.
Restaurant managers and owners get lower turnover and efficiency. Customers enjoy better service which results in higher sales and increased tips for their employees. It’s truly a win/win situation.
Toast has achieved significant growth in the 15 months since its IPO. The company is still serving less than 9% among the approximately 860,000 locations across the U.S.
Toast’s revenues grew by 65% over the past nine months and will surpass $1 billion in recurring revenue annually over the next few quarters. Recent management updates emphasized that there had been no pullback in demand. It is also expected that the company will reach profitability in 2023. This is well ahead of schedule.
Stephen Fredette, Jonathan Grimm and Aman Narang, who were co-founders of Toast, remain at the helm. Aman Narang serves as chief operating officer, chief technology officer and president respectively. They own 86 million shares of Toast stock and 25% of the voting rights, a total stake of $1.54 billion. Investors should remember that the founders have an interest in the company’s success.
Toast sells for just under 2x next year’s revenue, especially considering the huge opportunity.
The third and last stunning stock that will grow is Sea Limited (SE -0.62%). Despite the mounting losses in the last couple of years, this was done to expand its ecosystem of interconnected businesses that have room for growth over the long-term.
Garena, the company’s digital entertainment segment is driven by its mobile videogame. Free Fire. Despite the slowdown in game adoption due to the lockdown, the game is still one the most downloaded mobile apps worldwide, which fuels Sea Limited’s other business segments.
Shopee, the company’s e-commerce division, continues to experience enviable growth, surpassing industry standards with third-quarter revenues of $1.9 Billion, an increase of 32% or 39% in constant currencies. Gross merchandise volume (GMV), which was up 14%, drove this growth, but that’s not the entire story. Core marketplace revenue increased 54% while value-added service grew 20%. This seems to confirm the myth that ecommerce is dead.
Sea Money, a fintech company that Sea Limited owns, is the smallest but most promising segment. The company’s credit and mobile wallet businesses fueled a 147% increase in revenue to $327 million.
Recently, management has been laser-focused on profitability. This is evident in a 45% quarter over quarter improvement in adjusted EBITDA (excluding one-time charges).
This ecosystem should continue to expand for many years to come. Additionally, the stock is being sold at 2x next year’s sales, making it the lowest price to sales ratio in Sea Limited’s history.