What is common between leading chipmaker Advanced Micro Devices (AMD -0.17%) and women-first online dating player Bumble (BMBL)? While there are no obvious similarities as far as the business models are concerned, both companies enjoy solid competitive advantages in their respective markets and are growing their top line at impressive rates. These are exactly the kind of business fundamentals investors should be considering while building a long-term portfolio.

Considering their growth potential, both AMD and Bumble are also trading at reasonable valuations. Here are few more reasons why retail investors should consider purchasing and then holding on to these stocks for the long term. 

2 happy office workers using a digital tablet.

Image source: Getty Images.

1. Advanced Micro Devices

Shares of Advanced Micro Devices have gained some momentum after the company's stellar second-quarter results (ending June 30, 2021), with both revenue and earnings far surpassing consensus estimates. The company has also raised its year-over-year revenue growth guidance for fiscal 2021 from 37% to 60% and non-GAAP gross margin guidance from 47% to 48%. These are impressive numbers, considering that they follow an already strong 45% year-over-year revenue growth of fiscal 2020.

Investors seem to have become even more bullish after Chinese regulators gave antitrust clearance to Analog Devices' (ADI -1.21%) recently announced acquisition of Maxim Integrated Products. In addition, the market now expects Chinese regulators to also approve AMD's proposed acquisition of leading field-programmable gate array (FGPA) company Xilinx. However, since every deal is unique, it's hard to make realistic predictions in such situations.

But even without the success of the Xilinx deal, AMD's prowess in the fast-growing gaming, data center, and automotive markets is enough reason to propel the stock in a long-term upward trajectory. In the latest earnings conference call, CEO Lisa Su also expressed confidence in the company's ability to ramp up supply from its chip fabrication partners, despite the ongoing semiconductor shortage, which is expected to last until 2022,

According to Mercury Research, AMD currently accounts for 22.5% of the x86 central processing unit (CPU) market share, the highest it has achieved in the last 14 years. While the company has gained 4.2 percentage points in share in the past year, archrival Intel's share reduced year over year by the same amount to 77.5%. AMD is making rapid strides in the server CPU market, with market share jumping by 3.7 percentage points to 9.5% in the second quarter, again at the expense of Intel's share.

The rapid penetration of cloud services, especially driven by rising internal workload adoption at several large companies, has pushed up demand for AMD's server chips. This trend is expected to continue, considering that third-generation EPYC processors (x86 server CPU) are twice as fast as Intel's competing Xeon Gold lineup in some common workloads. The buzz around AMD will only get stronger as the company gears up for the launch of fourth-generation EPYC processors, based on 5nm processors scheduled for 2022.

AMD is also focused on consumer opportunity. The soaring demand for gaming consoles has proved to be a solid tailwind for the company. AMD's collaboration with Samsung to develop a custom GPU for the latter's Exynos system-on-chip (SOC) processor can prove to be a major growth driver for AMD in the burgeoning smartphone market.

AMD is currently trading at a trailing-12-month price-to-earnings (P/E) multiple of 39.54, which is significantly higher compared to the 26.7 median P/E multiple of the overall semiconductor industry. However, against the backdrop of solid growth across all end markets, robust technological advantages, and improving financials, AMD seems to be a good pick even at these elevated levels.

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Image source: Getty Images.

2. Bumble

A relatively new player in the sea of online dating apps, Bumble has managed to increase the U.S. market share of its pro-feminist namesake app from 17% in 2019 to 19% in 2020, according to Sensor Tower. This places Bumble app firmly at the No. 2 position in the U.S. dating app space behind top-ranking Match Group's (MTCH -0.17%) Tinder, which accounted for 40% of the domestic market. By allowing only women to initiate conversation in heterosexual matches, the Bumble app has enabled a safer and less harassment-prone environment for women.

The success of this strategy is apparent, considering that Bumble app's total paying users rose year over year by 36.5% to 1.47 million, while total average revenue per paying user (ARPPU) was up by 13.4% to $28.81 in the second quarter (ending June 20, 2021). These numbers are impressive on the back of a stellar first quarter (ending March 31, 2021) performance, where the Bumble app's total paying users jumped by 44% year over year to 1.35 million, and ARPPU was up year over year by 11.71% to $27.75. The company also operates another dating app, Badoo, with a user base of $1.45 million mostly in Europe and Latin American markets. Badoo's paying users and ARPPU are growing at a slower pace as compared to the Bumble app.

Since paying users are expected to account for only 14.69% of the online dating users in the U.S. in 2021, there is a huge opportunity available for the expansion of Bumble's target addressable market. Bumble estimates the global online dating market opportunity to grow annually by 13% from $5.2 billion to $9.9 billion in 2025. With the company's trailing-12-month revenue close to $685 million, there is a significant runway for growth in the years ahead. Besides dating, Bumble is also exploring other monetization avenues in areas such as platonic friendships (Bumble BFF) and business connections (Bumble Bizz).

In the second quarter, Bumble's revenue jumped 38% year over year to $186 million. However, profitability seems to have taken a hit since net loss doubled year over year to $11.1 million. High earnings volatility is not that abnormal for a young growth company.

The company is currently trading at a discount of more than 30% from its all-time high in early 2021. Considering the discounted share price and solid growth prospects, this stock could prove to be an attractive pick for retail investors.