Dogecoin (DOGE 7.71%) prices have jumped from $0.06 to over $0.39 in the past month. However, with high returns has come huge volatility: Dogecoin rose by around 40.8% from the previous closing price to $0.39 on April 19, but then lost 21.7% in a matter of few days, and closed at $0.30 on April 22.
Created by two engineers as a joke in 2013, Dogecoin's rise is a testimony to the power of organized efforts by online communities (and of Tesla CEO Elon Musk's tweets). The cryptocurrency's market price movements are not backed by any stable asset, or by demand-supply dynamics. Unlike Bitcoin, which is limited to 21 million tokens, Dogecoin miners can theoretically continue to mine the currency infinitely. This, combined with limited credibility and even lower utility, makes this asset an unsuitable pick for the average retail investor.
Instead, retail investors can go for Pinterest (PINS -1.55%), NVIDIA (NVDA -10.01%), and Cresco Labs (CRLBF -4.76%) -- three disruptive stocks with immense growth potential and far less volatility -- to make a killing in 2021.
Image source: Getty Images
1. Pinterest
Pinterest's share price has shot up over 273% in the past year. The visual search-based social media company lost almost 14.7% in the last week after Cleveland Research noted a probable decline in spending on Pinterest by some omnichannel retailers in the first quarter. Omnichannel retailers aim at providing a seamless experience to customers across all online and offline sales channels. The recent pullback, however, presents an attractive entry point for retail investors, considering that even Cleveland Research remains optimistic about Pinterest's long-term growth prospects.
Pinterest's global monthly active users (MAUs) jumped 37% year over year to 459 million, while average revenue per user (ARPU) was up 12% year over year to $4.26 in 2020. These metrics will only become stronger in 2021, since companies will be increasing their advertising spend in a post-pandemic economy.
The partnership with Shopify (SHOP 0.23%) is enabling Pinterest to reach out to 1.7 million merchants, who can use its platform to help customers discover products and make direct purchases from their websites. Pinterest benefits from increased advertising spend and social commerce as well as from an expanded product catalog that allows for more personalized recommendations to users and better conversion rates. Shopify merchants, most of which are small and medium businesses, will also earn more due to increased audience reach, considering that 97% of searches on the platform are for unbranded products.
Pinterest also has a unique demographic advantage; 60% of its users are women. Women are responsible for 70% to 80% of all consumer purchasing decisions. The company has also reported a 40% year-over-year increase in digitally savvy Gen Z user base in 2020. Pinterest benefits from having a user base with high purchase intent -- approximately 85% of users claim to visit the platform when they start a new project. All these factors will help boost both the active user count and the monetization potential of the platform in the coming years.
Trading at over 29 times trailing-12-month sales, Pinterest is not a cheap stock. However, this high-growth company has solid fundamentals and is poised to deliver year-over-year revenue growth of at least 70% in the first quarter of fiscal 2021 (results will be released on April 27). Although still unprofitable, the company has managed to report $305 million in adjusted EBITDA for fiscal 2020. With a rapidly growing and engaged customer base and lucrative partnerships, Pinterest seems well-positioned to write a solid success story in coming years.
2. NVIDIA
Graphics chip specialist NVIDIA is currently trading close to its 52-week high and has gained over 110% in the last year. The pandemic-driven boom in demand for personal computers has translated into 41.5 million units of discrete graphics processing units (GPU) shipped globally in 2020, far surpassing the 3 million units shipped in 2019. The numbers might have been even higher had there not been a worldwide semiconductor shortage constraining supply. Despite these challenges, the global PC market is expected to grow year over year by 8% in 2021. With NVIDIA accounting for 83% of the overall discrete GPU market in the fourth quarter, the company stands to benefit disproportionately from this growing market opportunity.
The International Data Corporation has estimated gaming PC shipments will jump year over year by 18.4% to 65.1 million in 2021. This bodes well for NVIDIA and especially for its RTX 30 series GPUs, for which demand outstripped supply in the fourth quarter. The gaming segment is the company's key revenue driver and accounted for 46.7% of its fiscal 2021 (ended Jan. 31, 2021) revenue.
Although beset with several regulatory setbacks in completing the $40 billion acquisition of chip architecture designer ARM Holdings, the company's pace of innovation has been undeterred. Recently, the company announced its first data center CPU, the ARM-based "Grace" chip, which is ten times faster than existing servers and is well suited for high-performance computing and artificial intelligence workloads. NVIDIA's GPUs are already being used for computationally intensive workloads in the data center market. In fiscal 2021, the data center segment accounted for just over 40% of the company's total revenue. However, the foray into the highly profitable data center CPU market starting in 2023 positions it as direct competition to leading semiconductor players such as Intel and Advanced Micro Devices.
Although NVIDIA trades close to 23 times trailing-12-month sales, the valuation seems justified. The company's growth prospects in the gaming and data center markets are unparalleled. With NVIDIA now guiding for first-quarter year-over-year revenue growth of over 70%, this stock is well-positioned to continue its upward trajectory in the coming months.
3. Cresco Labs
Although U.S. multistate operator (MSO) Cresco Labs' stock has lost over 11% in the last month, the gloom will not last for long. The secular trends in the U.S. cannabis industry are too strong to ignore. A recent survey shows that marijuana consumption in the U.S. has increased by 56% as compared to 2018. With the ongoing state-level legalization of medical and recreational marijuana, the stigma around marijuana usage is on a decline.
On April 19, the House of Representatives passed the SAFE Banking Act. If the bill is passed by the Senate and signed by President Biden, U.S. banks and credit unions will be able to work with licensed cannabis producers without risking penalties. Access to capital will dramatically improve the financial prospects of the U.S. MSOs.
On April 1, New York became the 17th U.S. state to legalize recreational marijuana. Although sales will not start before 2022, Cresco seems well-positioned to leverage this opportunity, considering it already has four retail Sunnyside locations in the state.
Cresco Labs has strategically created a presence in 10 states, which together account for 63% of the U.S. marijuana addressable market. The company has also taken advantage of economies of scale by focusing more on large-scale marijuana cultivation and wholesale distribution. The success of these strategies is reflected in the company's solid financial performance. In fiscal 2020 (ended Dec. 31, 2020), the company's revenue jumped over 271% year over year to $476.3 million, while adjusted EBITDA was up 7.4% year over year to $116 million.
Against the backdrop of solid structural trends and robust fundamentals, Cresco Labs can prove to be an extremely attractive addition to the retail investors' portfolio.
