For more than 18 months, the benchmark S&P 500 has been practically unstoppable. Following the quickest decline of at least 30% in the index's storied history, it's since doubled in value, with growth stocks leading the charge higher.
But not every high-growth company has been moving up with the broader market. There are plenty of great businesses currently trading at significant discounts to their 52-week highs that offer substantial upside for patient investors. The following five discounted growth stocks all have the ability to turn a $200,000 investment into a cool $1 million (or more) by 2030.
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Pinterest: Down 44% from its 52-week high
Social media up-and-comer Pinterest (PINS 0.43%) has been pummeled since late July, which is when the company announced a sequential quarterly reversal of its monthly active user (MAU) growth. In total, Pinterest had 454 million MAUs, down from 478 million MAUs in the first quarter. But if you look at Pinterest's historic MAU growth over three or more years, you'd see that a single quarter fluctuation doesn't change the company's growth trajectory.
What's far more important to recognize is that Pinterest's relatively slower growth in the second quarter didn't alter advertisers desire to reach these users. Average revenue per user (ARPU) catapulted higher by 89% globally in the June-ended quarter, with 163% ARPU growth noted internationally. International ARPU could double multiple times this decade, which should allow Pinterest to sustain double-digit sales growth throughout the decade.
Something else that's often overlooked with Pinterest is that its user base can be targeted better than any other social media platform. With users willingly sharing the things, places, and services that interest them, Pinterest simply needs to keep its MAUs engaged and connect them with merchants specializing in their interests. This ability to target specific users should give Pinterest exceptional ad pricing power.
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Jushi Holdings: Down 53% from its 52-week high
Within the cannabis space, small-cap U.S. multistate operator (MSO) Jushi Holdings (JUSHF -3.92%) has all the tools necessary to quadruple (or more) in value by 2030.
If you're wondering why marijuana stocks have gone up in smoke over the past seven months, look no further than the disappointment that Congress hasn't passed any cannabis reforms. Nevertheless, with 36 states having legalized cannabis in some capacity, Jushi and its peers have more than enough opportunity to thrive without federal action.
What makes Jushi such an intriguing pot stock is its three state focus: Pennsylvania, Illinois, and Virginia. All three of these states offer billion-dollar sales potential, and they're all limited-license markets. Pennsylvania and Illinois purposely cap how many retail licenses they'll issue in total and to a single business, while Virginia assigns licenses by jurisdiction. With only 24 operating dispensaries at the moment, Jushi is seeking potentially high-dollar markets where regulators are purposely reining in competition. This way it can build up its brands and a loyal customer base without being steamrolled by an MSO with deeper pockets.
It's also worth pointing out that $45 million of the first $250 million in capital raised by the company came from executives and insiders. When the interests of executives and insiders align with shareholders, good things tend to happen.
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EverQuote: Down 66% from its 52-week high
Insurance is far from an exciting industry. However, beaten-down online insurance marketplace EverQuote (EVER -3.62%) is trying to make insurance shopping less of a hassle for consumers and its clients (the insurance companies).
According to EverQuote, the U.S. insurance distribution and advertising market is expected to grow by 4% annually through 2024. Meanwhile, digital insurance ads are slated to grow by 16% annually over the same time frame. EverQuote strictly operates in this digital realm.
The bulk of the company's revenue comes from its auto insurance marketplace, which is partnered with 19 of the 20 largest auto insurers. It allows consumers to quickly price-compare policies and purchase them through its marketplace. Approximately 1 out of 5 users who obtains a quote on the platform will purchase a policy. The key point here is that instead of insurers throwing ad dollars at a broad and potentially unqualified audience, EverQuote is bringing them highly motivated consumers, and thusly getting them more bang for their advertising buck.
To boot, EverQuote is moving into new insurance verticals. In addition to auto insurance, it offers commercial, health, life, home, and renters insurance. These newer verticals represent a smaller percentage of total sales, but they're growing faster than the auto marketplace, and will play a key role in pushing EverQuote's valuation higher.
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Root: Down 82% from its 52-week high
Yet another innovative small-cap growth stock with the potential to turn a $200,000 investment into $1 million by the turn of the decade is insurance company Root (ROOT -4.26%). Despite losing more than 80% of its value since debuting as a public company, Root's unique approach to pricing insurance policies could be a game-changer.
Traditional auto insurance companies use broad-sweeping metrics to price their policies, including credit score and marital status. Unfortunately, these metrics don't tell insurers a key piece of information: If someone is a good driver or not. Root, on the other hand, relies on telematics to price its auto policies. It leans on highly sensitive instrumentation found in smartphones, such as the accelerometer and gyroscope, to understand turning, braking, and accelerating G-forces. In other words, Root can price policies based on how people drive prior to them buying a policy.
Admittedly, this new technology remains a work in progress. It initially showed a lower-than-anticipated direct accident period loss ratio during the first quarter of 2021, but reversed course in the sequential second quarter. Nonetheless, this loss ratio has consistently been below 100% since the beginning of 2020, demonstrating that Root can write profitable policies.
Although investors are staring down large short-term losses as the company ramps up its digital marketing campaign, Root's unique approach could turn this company into a big-time winner by 2030.
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PubMatic: Down 66% from its 52-week high
Last, but never least, small-cap advertising technology stock PubMatic (PUBM -0.14%) could reasonably turn $200,000 into $1 million (or a lot more) by 2030.
If you didn't catch the prevailing trend from the discussion of EverQuote above, let me reiterate that advertising is going digital. While we may never see billboard or print ads disappear, it's becoming more effective than ever to reach users online. That's where PubMatic comes into play.
PubMatic is a sell-side programmatic ad platform that uses machine-learning algorithms to optimize the placement of ads for its clients. Or in plainer English, PubMatic goes to bat for publishers looking to sell their display space. It aims to optimize ad placement for users, which keeps readers and advertisers happy, and tends to lift display pricing power for the company's publishers. Clearly it's working, as the company's existing publishers spent 50% more in the June-ended quarter than they did in Q2 2020.
What's more, we're still in the relatively early stages of this digital shift. Whereas PubMatic sees industrywide annual digital ad sales growth of 10% through 2025, it's consistently doubling up the industry's growth rate. In fact, most of PubMatic's growth should originate from connected TV and over-the-top programmatic ads, which is one of the fastest growth niches within the digital ad space.
