You don't have to buy into the motto of Gordon Gekko that "greed is good" to want to be a millionaire, but investing on Wall Street is certainly one avenue of achieving that goal.
One of the hottest game publishers in China
Leo Sun (NetEase) NetEase is one of the biggest game publishers in China. Its top franchises, which mostly target Chinese gamers, include Fantasy Westward Journey, Onmyoji, and Ghost Story. It published three of the top 10 highest-grossing games in the Chinese iOS and Android app stores in July, making it tech giant Tencent's (NASDAQOTH:TCEHY) biggest rival in mobile gaming.
Video games generate most of NetEase's revenue, but it also develops social, news, and media apps, provides online services, and runs the e-commerce site Kaola.com. NetEase's revenue and earnings respectively rose 68% and 73% last year.
Last quarter, NetEase's gaming revenue surged 47% annually to $1.4 billion, its ad revenues rose 12% to $88 million, and its email, e-commerce, and other revenues jumped 69% to $494 million. Gross profit margins remained well above 60% at its gaming and advertising businesses, although gaming margins dipped on a growing dependence on lower-margin mobile games.
For the current year, analysts expect NetEase's revenue to rise 40% but earnings to dip 8% on higher game production expenses. However, its earnings could rebound 17% next year as it reaps the benefits of its investments.
NetEase's trailing P/E is less than half the industry average of 38 for internet information providers, and its forward yield of 1.4% is supported by a low payout ratio of 24%. This combination of robust growth, a big presence in the world's largest video game market, a low valuation, and a decent dividend make NetEase a potential multi-bagger in my book.
Providing the tools for e-commerce
Danny Vena (Shopify). The key to making millions in the market is easier than you might think. Buy stock in a company that is part of a growing societal, demographic, or technological shift -- one that has the potential to return many times its original investment -- and plan to hold it indefinitely. The tectonic shift is e-commerce, and the company is Shopify.
Shopify is a platform designed to help small- and medium-sized businesses set up and manage an online store without a pricey IT department. The company provides hundreds of ready-to-use templates that allow business owners to choose from a variety of options and customize their website to suit the needs of their respective customers.
Shopify can accept and process credit card payments and track orders by integrating with all the major payment processors, as well as third-party logistics and shipping services -- all while managing its sites so its customers can focus on their businesses.
Shopify has produced 75% year-over-year revenue growth in each of the nine quarters since going public, and its stock has gained more than 350%. In its most recent quarter, Shopify grew revenue to $151.65 million, up 75% over the prior-year quarter, while producing a net loss of only $14 million. More than 500,000 merchants in 175 countries around the world use the platform, which has expanded to include a growing list of enterprise-level customers as well.
Although its stock was recently hit by a noted short-seller questioning its business, most Wall Street analysts have dismissed the allegations as off-base, so you may still want to add Shopify to your shopping list at its new lower price.
Get ready to take flight
Rich Duprey (TripAdvisor): Being a company in transition is never easy, because your fortunes can easily go south just as readily as they can soar, and investors on the outside can have difficulty deciding which way they're really heading. TripAdvisor is one such company that looks like it's faltering, yet has the potential to be a millionaire maker if and when its business model gains traction.
Going from a simple location review site to a full-blown online travel agent has more than a few hurdles as TripAdvisor's core hotel business turned negative after four quarters of gains, while click-based and transaction revenue growth decelerated. That caused it to lower guidance, but there is still a lot of reason to be more than just hopeful about TripAdvisor.
For example, while non-hotel business only represents about a quarter of TripAdvisor's revenues, it continues to put in strong growth numbers, surging 31% in the quarter, and management is confident it will be profitable on an adjusted basis.
Traditional valuation metrics can look skewed at a company like TripAdvisor that is swinging from a period of depressed earnings to growth, so the travel site's price-to-earnings ratio of 65 times trailing earnings and 36 times next year's estimates shouldn't be seen as a stock that's overvalued. Investors looking to become millionaires in the future ought to be better served looking at how the transition is progressing, which at the moment may be two steps forward, one steps back, but ultimately is heading in the right direction.
Danny Vena owns shares of Shopify and TripAdvisor. Leo Sun has no position in any of the stocks mentioned. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NetEase, Shopify, and TripAdvisor. The Motley Fool has a disclosure policy.