The rise of cryptocurrencies has captured Wall Street's attention and helped push share prices up for a wide range of investments, including the companies that support their production or trade. But many investors have been turned off by the intense volatility in the currencies themselves.
If you're attracted to the growth potential that these cryptocurrencies promise, but would prefer a more stable long-term investment, then it's time to take a closer look at Iqiyi (NASDAQ:IQ), Wayfair (NYSE:W), and Palo Alto Networks (NYSE:PANW).
The Netflix of China
Jeremy Bowman (Iqiyi): With bitcoin prices fading fast, it's time for investors to look elsewhere for big-time growth, and one appealing opportunity is iQiyi (pronounced I-chee-yee). If you missed out on Netflix's meteoric rise, you may have another chance with iQiyi. The company is the leading video streamer in China and recently had its IPO after being spun off from Baidu, China's No. 1 search engine, which still owns a majority stake in Iqiyi.
Since its March IPO, Iqiyi has already found favor with investors as the stock has jumped more than 150% in just a few short months as it's announced new content partnerships, and formed an exclusive strategic partnership with JD.com, China's second-largest online retailer, linking membership program between the two companies. l
Elsewhere, the company secured a license for anti-piracy technology, a key advantage in the Chinese market, and said it was partnering with Tencent and Alibaba on content purchasing initiatives. All of those moves seem to make investors' eyes bulge as they see big opportunity ahead in the Chinese video entertainment market.
In its first report as a publicly traded company, Iqiyi showed off revenue growth of 57% to $777.6 million and said its operating loss margin narrowed from 34% to 22%. As more Chinese become internet users, Iqiyi's total addressable market will only become bigger, and the company's execution in its first few months could should reassure investors that their money is in good hands.
While the stock may not double again so quickly, the potential for blockbuster returns with this stock is considerable.
Redecorate your portfolio
Demitri Kalogeropoulos (Wayfair): Unlike its rival Overstock, Wayfair has no exposure to cryptocurrencies but instead focuses entirely on its e-commerce retailing business. There are some major financial benefits to that approach.
Take Wayfair's sales growth, which last quarter reached market-thumping 48% compared to Overstock's 3% uptick. The home furnishings specialist protected its profitability over the spring selling season, too, even though Overstock spent aggressively on marketing and advertising in hopes of arresting its rival's growth pace.
The fact that Wayfair's business has held up against competitive threats from Overstock and others suggests its business is stronger than many investors expected. Part of that strength comes from its many efforts to make the shopping, delivering, and home setup process as easy as possible for customers. Those moves include investing in a proprietary shipping network that's reducing delivery times for bulky objects, for example. "We're taking a large number of steps across our business to bring customers the best possible offering in our category," CEO Niraj Shah explained to investors, "and we're being rewarded with outsized growth in market share."
Wayfair hasn't yet produced an annual profit, and that makes this investment riskier than an investor would see in an established retailer. The stock could see impressive long-term gains, though, if management is right about the long-term market opportunity available in the global home furnishings niche.
The next big thing in networking is already here
Steve Symington (Palo Alto Networks): Next-generation cybersecurity platform leader Palo Alto Networks has already rewarded its earliest investors handsomely. Shares have climbed around 380% over the past five years, including a nearly 50% pop from this time last year.
But in the same way many investors believe cryptocurrencies are just getting started, Palo Alto Networks still enjoys a long -- and much more tangible -- runway for growth. As the world continues to migrate online, cyberattacks will inevitably grow in number and sophistication, which in turn will increase the demand for cutting-edge cybersecurity. With the help of new machine learning algorithms integrated into its natively integrated, extensible platform, Palo Alto Networks' customers enjoy seamless, simplified protection across their growing number of connected devices and endpoints on both local networks and in the cloud. That's why Palo Alto Networks continues to add thousands of new customers each quarter -- around 3,000 in its most recent quarter alone, to be specific, bringing its total to 51,000 in over 150 countries.
Of course, it's also an expensive quest. Palo Alto Networks still isn't profitable on a GAAP basis as it plows money into research and development and wrestles for market share in these early stages. But that's certainly not an uncommon way for today's tech industry juggernauts to effectively create shareholder value. And I think investors who buy Palo Alto Networks stock today still stand to enjoy the lion's share of its long-term gains.