Finding growth stocks that have years or decades of growth ahead of them can lead to market-crushing returns for investors. And with the introduction of several exciting technology stocks in the last decade, there are a lot of opportunities to invest in disruptive companies.
Today, I think Okta (OKTA -0.65%), Spotify (SPOT -7.28%), and Zillow (Z -0.46%) (ZG -0.69%) have the disruptive business model and growth potential to be great stocks for decades to come. Let's find out a little more about these three high-growth stocks.
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1. Okta: Growth in online security
It's amazing how fast Okta has become the standard in internet security for businesses. The service can provide authentication for everything from email to Microsoft Office to Zoom Video, and is growing rapidly as businesses and consumers add security measures to their workflow.
The rapid adoption of Okta's services has driven the revenue growth you can see below, which translates to at least 40% growth each year. The company is still losing money as it spends to grow sales, but as a software-as-a-service (SaaS) business, its long-term subscription revenue is what investors are looking for.
OKTA Revenue (TTM) data by YCharts
Once a company like Okta gets locked into a company or individual's operations, it's difficult to get those entities to change security providers. That's what makes this a growth stock that I think could continue to soar for years to come.
2. Spotify: The future of podcasts
For most of its history, Spotify has been focused on music. But its future is really in the podcast industry. Spotify has spent a few years expanding its podcast technology and content and seems to be one of the few publicly traded companies taking podcasts seriously. In fact, it's taking podcasts so seriously that it's doled out hundreds of millions of dollars to buy podcasting powerhouses like The Ringer from Bill Simmons and get an exclusive agreement for Joe Rogan's podcast, among other deals.
The goal for Spotify isn't just to be a distributor of podcasts, which it already is today. It's to monetize podcasts long-term for content producers. Unless you're a major podcast name, it's difficult to monetize a podcast right now. A technology company like Spotify could help connect advertisers with content and consumers to create an extremely valuable service.
If podcast listening continues to grow, the industry will need someone to make the industry financially viable. Spotify seems to be the natural fit to fill that role. And that could keep this company growing for decades.
3. Zillow: Changing real estate
The real estate market may have more potential for disruption than any other in the U.S. Real estate agents have long controlled the market, normally charging a percentage of each sale to act as a broker between buyer and seller. But this is a service that's increasingly being impacted by technology.
Zillow began by building a real estate database for consumers, eventually drawing in real estate agents, who advertise on the platform. But the bigger opportunity is a true disruption of real estate as we know it, making buying and selling easier for everyone involved.
That's what Zillow Offers is in the 25 real estate markets where it operates. Zillow Offers allows a homeowner to sell a home quickly to Zillow, foregoing the process of preparing to sell, holding open houses, and negotiating with buyers. Then Zillow prepares and sells the home itself. The business is already significant for Zillow, generating $1.23 billion of the company's $1.89 billion of revenue in the first half of the year. Offers isn't yet profitable, but Zillow will, over the long term, learn how to price home offers and sales in order to generate a profit.
Zillow is becoming a go-to for home buyers and sellers nationwide, which is a great business on its own. But it's not why this growth stock will soar. Offers is the real future, and there aren't any real competitors in this new market. So if Zillow can turn it into a profitable business the stock has a bright future.
Disruption is the name of the game
Companies that grow for decades often disrupt large markets in the process of building their business. That's exactly what Okta, Spotify, and Zillow are doing, and it's why I think they'll keep growing for years. These are going to be household names if they aren't already, and should be big winners for long-term investors.
