What makes the stock market different than most speculative investments is that there tends to be a lot more security attached to a company's performance. When you buy a share of a company with a trove of cash, great management, and a novel idea, you're giving the company a vote of confidence in the future. There's always risk, but it's minimized by a proven track record and clear opportunities.
That's why a company's potential is often more important than its history of success. If a stock price doubled in the past, it doesn't mean it will in the future. But winners tend to keep winning, and it makes sense that a company that was able to demonstrate past growth has the tools and the formula to keep doing it. Peloton Interactive (PTON 7.20%), Etsy (ETSY 2.42%), and Roku (ROKU 6.58%) have all demonstrated massive growth over the past two years. Let's see what might lie ahead over the next two years for these three stocks.
1. Peloton: A 289% stock price jump over two years
When Peloton went public just over two years ago, it wasn't so clear to investors that sales would explode just a few months later. The stock had some mild movement before the March 2020 crash and then skyrocketed as Peloton became a pandemic darling. The price has come down as the company has dealt with several challenges, but investors who saw the potential early on are still reaping the rewards.
Sales grew by triple-digit percentages throughout the pandemic, and demand was so strong that management couldn't keep up. Now that the economy has somewhat reopened and Peloton faces tough comps (comparisons to the same period last year), growth is decelerating. Fourth-quarter revenue (covering the three months ended June 30) increased a respectable 54% over 2020, but Peloton is expecting a 5% year-over-year increase for the 2022 first quarter and a 35% increase for the fiscal year. The stock price has gotten so low -- down 42.6% this year as of this writing -- that the stock is becoming more of a value.
What's there to be excited about? Plenty. Peloton management easily pivoted from its core product of a connected-fitness bike to several other products and services, including connected-fitness workout subscriptions, new types of equipment, and opening up in new markets, such as its launch in Australia. It managed a treadmill recall after serious injuries were reported, and demand is still outstripping supply. The Peloton app has a 4.9-star (out of 5) rating in the Apple store, and the 12-month subscription retention rate was 92% in Q4. And the company expects connected-fitness subscriptions to increase 56% for the full year.
Don't let the sales slowdown deceive you. People are happy with Peloton's products and services, and along with new ventures and markets, that gives the company a lot of room to grow. The stock price might not nearly quadruple as it did over the past two years in the next two years, but there's no reason to think it couldn't potentially double from its current price and, over the long term there's plenty to be excited about.
2. Etsy: A 261% stock price jump over two years
Etsy was another surprise winner of the pandemic. The company, under new management, went from a niche craft platform to a mainstream creative marketplace. It might have been custom-sewn masks that brought customers in, but they're staying for the millions of products available exclusively on the Etsy platform.
Like Peloton's, Etsy's sales growth is coming down from triple-digit increases, rising just 23% year over year in the second quarter. But that increase also beat tough comps, and while gross merchandise volume (GMV) increased 10%, non-mask GMV increased 31%. Buyer frequency also got stronger, with GMV per buyer increasing by 22%. Those are great signs of what's to come.
Etsy has invested in its platform, offering product videos, customer updates, and an improved search function. These have helped it stand up to the formidable competition of Amazon, which launched its own handmade category. Etsy also recently acquired two new platforms, fashion resale company Depop and Brazilian e-commerce company Elo7, to expand its reach.
2021 is proving to be a challenge for many companies that outperformed last year, including all of those on this list. For Etsy, that comes in the form of people shopping in stores again. But the shift to digital commerce is also proving permanent, and as we head out of 2021, Etsy should begin to stabilize and demonstrate its staying power.
3. Roku: A 441% stock price jump over two years
Roku stock is down about 1.4% this year after a really big year in 2020. The streaming company has two businesses: streaming video players and ad-supported streaming content platform. Player growth has been soft, partially due to supply chain issues. But platform revenue has been strong, generating most of the company's recent growth. Management is expecting slowing sales growth, but most of the company's indicators point to a strong growth story.
Active accounts increased by 1.5 million in the second quarter, demonstrating that more people are engaging with the Roku platform. Platform revenue increased 117% as advertisers have begun moving to streaming, and Roku is projecting around 50% sales growth for full-year 2021.
Hours of content streamed on the platform were down from the Q1 numbers but up from last year. That makes sense as more people lately have been seeking entertainment outside their homes after more than a year of pandemic-related isolation. But they're not giving up their streaming subscriptions, and they'll find a happy medium as things settle into place in the wake of restrictions.
Roku has made plenty of exciting announcements recently, including an increase in its own original streaming content. That makes it a real contender in the streaming wars, and as of August, the top five streaming programs on the Roku channel were all Roku originals (rather than licensed content). It also launched new devices and partnerships, setting it up for more growth.
That's in addition to its existing deals with the top streaming networks and a large collection of Roku-equipped streaming devices. It's well-positioned to keep succeeding over the next two years, although there could be some volatility along the way.