The great thing about investing in stocks is that there are always new opportunities popping up out of nowhere. If you invested $10,000 in Netflix stock 10 years ago just as streaming was taking off, you would have $150,000. All it takes is one great stock to improve your financial situation.
As the saying goes, opportunity comes to the prepared mind. There are stocks out there right now that could deliver big returns over the next decade. Here are three stocks capitalizing on secular trends that look promising.
Roblox: An interactive social media platform
Roblox (RBLX 1.09%) just completed its initial public offering in March. It's a new type of social media platform that is built around 3D digital worlds. It has 37 million users who come to Roblox every day to connect with friends and do fun things together.
The platform draws inspiration from toys and games, so Roblox works like a video game. There are 8 million developers creating games, avatars, and other content on the platform that can be purchased with Robux -- a virtual currency that the company uses to monetize its users.
How is the business performing? From 2018 through 2020, revenue grew from $325 million to $924 million. The company is growing fast, but it reported a net loss of $253 million last year. This is because management is prioritizing compensation for the content creators on the platform to attract and retain talent.
The lack of profitability at this early stage in the growth curve is not worrisome. Growth in content and users should lead to improving margins down the road. In its S-1 registration filing, management states: "Over the next few years, a major goal is to drive as much money to our developer and creator community as possible while maintaining reasonable margins and free cash flow."
Roblox is already showing the signs of producing tremendous amounts of free cash flow over time, with $411 million generated in 2020, up from $35 million in 2018.
Founder and CEO David Baszucki has a vision to one day connect billions of users. The company saw its daily active users nearly double during the pandemic, which could be the start of something special for investors who are willing to buy shares in this recent IPO stock.
Roku: A top streaming platform
Netflix made investors a lot of money over the last 10 years, but the streaming market is just getting started. Other major content owners, like Walt Disney, Discovery, and AT&T's HBO, have only just started to get serious about streaming. With so many options available now, demand is escalating for streaming service aggregators like Roku (ROKU 3.78%) that help viewers discover content they might like across multiple services.
Total streaming hours on Roku surged 55% to reach 17 billion in the fourth quarter. This comes during a quarter when Roku completed a deal to bring HBO Max to its platform in December.
Revenue climbed 58% last year to reach $1.8 billion. Strong growth helped the company turn its previous operating loss into a profit the last two quarters of the year, and the future should be very lucrative for Roku.
The platform now has 51 million active accounts. As more people sign up, Roku is looking very attractive to advertisers that are starting to shift more of their ad budget to digital platforms. Growing ad revenue on Roku helped push average revenue per user up 24% in Q4, but we're still in the early innings of this shift. Roku is seeing lots of growth across several advertising segments, including major retail brands.
The stock looks expensive, trading at a high price-to-sales ratio of 21, but the massive growth opportunity in streaming should allow Roku to grow into its valuation over the long term.
Corsair Gaming: Enabling gamers' favorite hobby
Corsair Gaming (CRSR -1.42%) offers investors a way to ride the growth happening in the video game industry, especially live game streaming. Believe it or not, watching others play video games is an explosive growth market. Last year, viewers watched 27.9 billion hours of content across all game-streaming platforms, according to Streamlabs.
This represents growth of 78% year over year and includes engagement estimates of the leading platforms, such as Amazon's Twitch and Alphabet's YouTube Gaming. Compare those hours to the 17 billion spent on Roku's platform, and you can see why there's a potential opportunity here for investors.
Corsair Gaming completed its IPO last year and is a leading supplier of gaming gear, such as headsets, mice, keyboards, microphones, and computer components for gaming and content creators. Across all these products, total revenue grew 55% in 2020, with growth reaching 70% in the fourth quarter.
Revenue from streaming gear saw the biggest jump, with revenue surging 83% last year. "Our new microphone, which started shipping in volume in Q3, continues to exceed our sales expectations," CEO Andy Paul said during the Q4 earnings call.
Streaming is not a blip in the growth curve for Corsair, but a long-term opportunity. The strong operating results tell management that "streaming and sharing video content is becoming a way of life for millennials in the same way as playing video games has become," as Paul explained.
Keep in mind, management expects growth to moderate significantly this year, which is expected following the high demand during the pandemic. Management's guidance calls for 2021 revenue growth to come in between 5.7% and 14.5% year over year.
Beyond 2021, Corsair Gaming looks like a good investment for a few reasons. It's been around since 1994 and is an established brand in the computer peripherals market. Most importantly, it gained market share during the pandemic when just about everyone interested in streaming or playing games was doing so. That's a good indicator that Corsair's brand is standing out in a competitive market that includes other top brands, like Logitech International.
Overall, Corsair should benefit from growing demand in gaming. More players continue to pick up the hobby and stream their gameplay, creating an expanding market for Corsair's products. Investors who build out a position this year could potentially make a nice return with this stock over the next 10 years.