One of the craziest years on record for the stock market will come to an end in just five days. However, not all investors are thrilled to be putting 2020 in the rearview mirror.
Cryptocurrency investors reemerged from shadows in March, and bitcoin has been virtually unstoppable ever since. As of the very early morning of Dec. 23, the world's largest cryptocurrency was up nearly 233% on a year-to-date basis.
While there's no one specific factor driving bitcoin higher, it's looks to be some combination of a falling U.S. dollar, greater acceptance by merchants, and the ongoing move away from cash during the coronavirus pandemic.
But 2021 could bring about change. It's my belief that bitcoin will take a back seat in the returns department to the following trio of high-powered growth stocks next year.
Singapore-based Sea Limited (SE) is one company that could crush bitcoin in 2021. Despite its shares quintupling in value over the past year, Sea's operating results show it's just getting started.
Sea brings together three exceptionally fast-growing businesses under one umbrella. First up is the company's digital entertainment segment, which is responsible for the lion's share of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Sea ended September with close to 573 million active gaming users, 65.3 million of which are paying customers. For some context, the number of paying users is up 124% from the prior-year quarter.
Yet what's really creating a lot of buzz is Sea's online shopping platform, Shopee. During the third quarter, gross orders catapulted 131% higher from the year-ago period, with gross merchandise value effectively doubling to $9.3 billion. For the moment, Sea's e-commerce segment is a money-loser. However, it's incented to invest heavily in an operating model that has sustainable high double-digit -- or even triple-digit -- annual sales growth potential.
Third, Sea has its nascent but growing digital financial services segment. The company's mobile wallet payment volume surpassed $2.1 billion during the recent quarter, with the number of paying customers increasing to 17.8 million. Considering that Southeastern Asia is a largely underbanked region of the world, mobile wallets could be a surprisingly strong growth driver for the company.
The upcoming year could be especially fruitful for U.S. marijuana stocks. Though rumors persist about a possible federal legalization with President-elect Joe Biden in the White House, I believe state-level legalizations and organic growth within legalized states provide more than enough opportunity for high-powered growth stocks like small-cap Jushi Holdings (JUSHF -7.14%) to shine.
Arguably the biggest differentiator between most vertically integrated multistate operators and Jushi is the company's focus on the limited license legalized states of Pennsylvania, Virginia, and Illinois. Limited license states either cap the number of total licenses they'll issue to retailers, or they grant licenses to cover certain jurisdictions or territories. Either way, the point of targeting limited license states is to have the ability to build up Jushi's brand with minimal competition. The company expects $182 million to $215 million of its $205 million to $255 million in sales forecast for 2021 will be derived from its big three limited license states.
Something else that stands out about Jushi is its management team. Generally, when executives and insiders have a lot of skin in the game (i.e., own a lot of outstanding stock or have a large vested interest in their underlying company's success), it bodes well for a company's future. Out of the roughly $250 million in capital that Jushi has raised since inception, approximately $45 million has come from insiders and executives.
Jushi currently has 13 operational dispensaries, but holds enough licenses to expand its retail count to more than two dozen stores. With an opportunity to nearly triple its sales in 2021, it has the look of a budding growth stock that can leave bitcoin eating its dust.
The third high-powered growth stock that can handily outpace bitcoin in 2021 is edge cloud services provider Fastly (FSLY -3.12%). Fastly, which speeds up and secures the process by which content reaches end users, is up 422% this year, but looks to be in the very early stages of its growth.
In early October, Fastly experienced a hiccup when it modestly revised its third-quarter sales forecast lower on account of weakness from its largest customer, TikTok. At the time, the Trump administration was threatening to ban downloads of TikTok stateside, which prompted TikTok parent ByteDance to pull most of its data from Fastly's network. In the first half of 2020, TikTok accounted for 12% of Fastly's sales.
But when Fastly released its third-quarter operating results weeks later, Wall Street and investors were able to see that incredible growth can continue with or without TikTok. Total customer count jumped by 96 from the second quarter. Furthermore, Fastly's dollar-based net expansion rate of 147% was 10 percentage points higher than what it recorded in Q2. In other words, spending from existing clients is actually accelerating. Even without a majority of TikTok's traffic on its network, sales grew by 42% in Q3 from the prior-year quarter.
Though it's been a clear winner during the pandemic, the ongoing push of businesses and consumers moving online is going to keep Fastly busy well after the coronavirus is no longer an everyday talking point. Fastly has the potential to consistently grow by 25% to 30% annually throughout much of the decade, which is why it's going to crush bitcoin in 2021.