For those looking to achieve significant stock price gains, one time-honored strategy is to invest in companies that are on the cutting edge of technology, catching the wave of a broader societal or technological trend, or ideally both. In many cases these entrepreneurial ventures are still in their early stages, unprofitable, and taking on entrenched and well-heeled competitors. This avenue isn't without risk, but can lead to explosive gains over years and even decades.
With that in mind, let's look at three companies that are perfectly positioned to make it big over the next ten years: e-commerce tools provider Shopify (SHOP -2.37%), streaming video pioneer Roku (ROKU 0.15%), and database disruptor MongoDB (MDB 0.81%).
Image source: Shopify.
Empowering the next generation of e-commerce
Since its public debut in mid-2015, Shopify has been a standout performer, gaining more than 1,500% -- and that may be just the beginning. The company provides a wide range of tools that make the task of hawking goods online much easier, empowering the continuing wave of digital sellers. While Shopify initially targeted small- and medium-sized businesses, Shopify Plus -- which provides tools geared toward the special needs of enterprise level merchants -- is now one of the fastest-growing segments of the business.
Shopify recently announced that more than 1 million merchants were building their businesses using its platform, driving revenue up more than 45% in the third quarter. The company continues to generate manageable operating losses as it works to drive its international growth, expand its nascent fulfillment network, and enable the next generation of online entrepreneurs.
While you might be tempted to think that the low-hanging fruit in e-commerce has all been picked, consider this: online retail accounted for just 14% of global retail sales in 2019, and that is expected to climb to 22% by 2023. At the same time, total retail is expected to grow from $3.5 trillion to more than $6.5 trillion. That suggests that the total e-commerce market could soar 191% from $495 billion to $1.44 trillion within the coming four years.
Shopify isn't profitable and it also isn't cheap, selling at about 25 times sales, but given the potential opportunity ahead and its stellar growth as a backdrop, the company is perfectly positioned to benefit from this large and growing trend.
Image source: Roku.
Televising the streaming revolution
While streaming video has only taken center stage over the past decade, there's no denying that its growing adoption has accelerated the phenomenon of cord-cutting. In the first half of 2019 alone, the cable industry lost 2.88 million customers, and those losses accelerated in the third quarter, shedding another 1.74 million. Cable executives expect that to continue, forecasting the loss of even more customers in 2020.
While the incumbents battle for viewers, one company stands to benefit the most from the move to streaming -- Roku. Since its debut in late 2017, the streaming pioneer's stock has soared more than 450%, and by all accounts, it's just getting started.
In addition to its namesake streaming devices, the company's operating system (OS) was found in one in three smart TVs sold in the U.S. last year, giving Roku's platform unprecedented reach. By giving consumers access to thousands of paid and ad-supported streaming services, Roku has become the platform of choice for a growing number of streaming viewers. The majority of the company's revenue now comes from digital advertising and smart TV licensing.
Want proof? Roku's revenue grew by 50% year over year in the third quarter, but platform revenue -- which consists of advertising, The Roku Channel, and its smart TV OS -- grew even faster, up 79%. Active accounts grew 36% year over year to 32.3 million and viewer engagement is soaring, with streaming hours of 10.3 billion, up 68%.
Roku's isn't yet profitable but its losses are slight, as management works to expand its streaming know-how internationally. Its valuation is also somewhat lofty, at nearly 10 times sales, but considering the greenfield opportunity ahead, it's a small price to pay. While streaming services pump billions of dollars into building out their libraries, Roku welcomes all comers to its platform and is poised for massive growth over the next decade.
Image source: Getty Images.
Data disruptor
Analyzing data has become a critical component of the internet age, but until recently the ability to parse information held in databases was stuck in the Stone Age. Once upon a time, information could be contained neatly within rows and columns, but those days are gone, as photos, video, audio, and indeed entire documents can't be examined from within the confines of a cell.
Enter MongoDB, with its modern age database that can handle a wide assortment of data types pulled from a variety of sources, thereby empowering developers and the apps they create. The company draws customers in with its free community server product, but it's MongoDB's cloud-based, fully managed database-as-a-service product -- Atlas -- that's driving the company's massive growth.
In its most recent quarter, MongoDB reported revenue that grew 52% year over year, while subscription revenue climbed 56%. Those results are impressive enough in their own right, but revenue generated by Atlas soared 185% and now represents 40% of the company's total. Not bad for a product that was only released in late 2016.
Since its IPO just over two years ago, MongoDB's stock has soared nearly 400%, and while it has a long runway, it isn't for the faint of heart. The company doesn't yet generate a profit and is valued at a nosebleed 22 times sales. While that may sound expensive, it's a small price to pay for cutting-edge technology providing robust growth in an industry that's ripe for disruption.
