For over 12 years, growth stocks have been the talk of Wall Street -- and with good reason. Persistently low lending rates have allowed fast-growing companies abundant access to cheap capital that they've been able to use to hire new employees, acquire other businesses, and innovate for the future. With the nation's central bank standing firm on its monetary policy, at least in the near-term, growth stocks should continue to thrive.
Of course, not all growth stocks are created equally. The following five companies are projected by Wall Street to be some of the fastest-growing stocks on the planet over the next four or five years, assuming analysts' sales projections (per FactSet) come to fruition.
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Snowflake: Implied five-year sales growth of 819%
Among cloud stocks, you'd struggle to find a company with a persistently higher annualized growth rate than Snowflake (SNOW -1.19%). After bringing in $592 million in full-year sales in fiscal 2021, Wall Street is looking for the company to deliver $5.44 billion in annual sales in fiscal 2026.
What really has Wall Street excited are Snowflake's plain-as-day competitive advantages. Most notably, its cloud data-warehousing solutions are layered atop the most-popular infrastructure storage solutions. Whereas it can be difficult for businesses to share data that's stored on competing cloud service providers, this sharing of information is seamless for Snowflake's customers.
Snowflake also shunned the subscription-based operating model in favor of a pay-as-you-go model. By charging its clients for the amount of data stored and the number of Snowflake Compute Credits used, the company is making its pricing transparent and potentially more cost-effective for users.
While there's no question Snowflake is one of the fastest-growing stocks on the planet, where the company's stock should be valued is debatable. Though some premium is merited for such consistently high growth rates, I'm not so sure paying 71 times sales for this year makes sense for a company that's still many years away from profitability. There may not be significant downside here, but I also fail to see how this valuation stretches much further to the upside.
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Teladoc Health: Implied five-year sales growth of 416%
Healthcare stocks on the leading edge of innovation are a pretty good bet to be among the fastest-growing stocks on the planet through mid-decade. Telehealth services giant Teladoc Health (TDOC -2.04%) is expected to see its annual sales climb from a reported $1.09 billion in 2020 to an estimated $5.62 billion by 2025. That's an increase of 416%, for those of you keeping score at home.
Even though Teladoc found itself in an ideal scenario in 2020, with the coronavirus pandemic wreaking havoc in the U.S., this was a company growing sales by an annualized average of 74% in the six years leading up to the pandemic. In other words, we're clearly not talking about a one-hit wonder.
Telemedicine is the future of healthcare in the U.S. and globally. While not all appointments can be conducted virtually, telehealth visits will provide added convenience for patients and make it considerably easier for doctor's to keep tabs on patients with chronic illnesses. This ease-of-use should result in improved patient outcomes, which'll mean less money out of the pockets of insurers.
Teladoc's rapid growth is also a function of its buyout of applied health signals company Livongo Health in the fourth quarter. Livongo leans on artificial intelligence to send its chronically ill members tips to help them lead healthier lives. It ended the first quarter with 658,000 diabetes members, and the company was already profitable before being bought out by Teladoc. As a combined company, this duo looks unstoppable.
Image source: Square.
Square: Implied five-year sales growth of 299%
Fintech stock Square (SQ -1.49%) is also projected to be one of the fastest-growing companies on the planet through the midpoint of the decade. Following its sales surge in 2020 to $9.5 billion, Wall Street's consensus for 2025 is that it'll bring in $37.86 billion. That's a hair shy of a quadrupling in sales in five years.
Square's most foundational growth driver, its seller ecosystem, will continue to point the needle higher. The amount of gross payment volume (GPV) traversing its network grew by an annualized average of 49% in the seven years leading up to the pandemic, but tailed off considerably in 2020 as merchants closed up shop due to the pandemic. With the U.S. economy reopening, Square looks to be on track for strong double-digit GPV growth this year.
However, the company's key growth driver is digital peer-to-peer platform Cash App. Cash App's monthly active user count more than quintupled since the end of 2017 to 36 million, and it's been a consistently more popular download than PayPal's Venmo. All told, Cash App allows Square to generate revenue from bank transfers, merchant purchases, and investments, which includes Bitcoin exchange and trading.
As of the end of 2020, the typical Cash App user was generating $41 in gross profit for Square, compared to less than $5 to acquire each new monthly active user. That's a heck of a trade-off that should make Square's shareholders very happy.
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Jushi Holdings: Implied four-year sales growth of 1,100%
The U.S. cannabis industry is home to a number of companies that'll deliver triple-digit sales growth over the next four or five years. But marijuana stock Jushi Holdings (JUSHF -3.19%) might have them all beat, with sales growth expected to hit 1,100% by 2024 ($81 million in 2020 to $972 million in 2024).
Compared to other multistate operators, Jushi is a tiny tot. It has 20 operational dispensaries at the moment, with 13 of those retail locations in Pennsylvania. The real key to Jushi's strategy is targeting markets that offer some level of competitive protection. That's why it's chosen to focus on Pennsylvania, Illinois, and Virginia.
While all three of these markets offer billion-dollar annual sales potential -- Illinois surpassed $1 billion in weed sales for the first time in 2020 -- the real lure is that they limit how many retail licenses are issued in total, as well as to individual businesses. Pennsylvania and Illinois have preset caps in place, whereas Virginia assigns licenses based on jurisdiction. This effectively limits Jushi's competition and ensures it'll be able to build up its brand and grab a loyal following.
Investors should also note that, despite its relatively small market cap, Jushi isn't afraid to go shopping. In January, the company acquired two dispensaries in California, the largest weed market in the world by annual sales. It also bought its way into Nevada in April. The Silver State is projected to lead the country in cannabis spending per capita by mid-decade. In other words, smart planning by management has Jushi set up for some serious growth.
A Tesla Model S plugged in for charging. Image source: Tesla.
Tesla Motors: Implied five-year sales growth of 270%
A final company most investors know well that has supercharged growth potential over the next five years is electric vehicle (EV) manufacturer Tesla Motors (TSLA 2.47%). Tesla brought in $31.5 billion in full-year sales in 2020, but Wall Street's consensus has the company pegged for $116.64 billion in sales by 2025.
Tesla is a clear and obvious beneficiary of the U.S. and most developed countries wanting to pursue cleaner energy solutions in order to reduce long-term carbon dioxide emissions. It's the first automaker in more than five decades to successfully build itself from the ground up to mass production, and it offers definitive first-mover advantages in the United States.
In particular, Tesla Motors' battery technology remains unsurpassed, at least for the time being. The company's batteries have better range, more power, and higher capacity than the competition. Considering that cash is no longer a concern, the company has more than enough capital to continue constructing new Gigafactories to assemble its vehicles and produce batteries.
But like Snowflake, valuation is a serious concern. You'd think a company with a $620 billion market cap, as of this past weekend, would be able to generate a profit from the products or services it sells. That's not the case with Tesla. Its adjusted profits have always come from selling renewable energy credits to other automakers or selling its digital assets (Bitcoin) for a profit. Based solely on its operating performance, Tesla still isn't making money. That makes its existing valuation dicey, at best.
