Growth stocks have been traveled on an inexorable path higher since the end of the Great Recession in 2009. Federal Reserve policies of keeping lending rates artificially low while engaging in quantitative easing have created an ocean of cheap, abundant capital, allowing companies with fast-paced growth stocks tohire, innovate, and acquire their way to new heights and greater profits.
Yet even those pale in comparison to those made by cryptocurrency darling Shiba Inu (SHIB -5.46%), the dog-faced token that has returned more than 13 million percent in a little over a year. A $10 investment in August 2020 means you would be a millionaire today.
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However, with little utility outside of changing hands back and forth among traders, there's a good chance Shiba Inu could crumble at any minute, compared with growth stocks, which have economic tailwinds behind them to continue outperforming the market.
Even with the S&P 500 regularly setting new all-time highs, the following growth stock duo has the capability to make you richer in November and, most importantly, well beyond.
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Barking up the right tree
Keith Noonan: If you find yourself drawn to the cuteness of the Shiba Inu token's mascot, I can't blame you. Heck, those dogs are pretty cute. However, there's a good chance that long-term investors will be better served by putting their money behind Chewy (CHWY -1.22%), a pet-focused company that's growing at a rapid clip and has a long runway for expansion.
Chewy operates an online marketplace for pet-focused products including food, toys, and a wide range of other supplies. The company also recently launched a separate platform that's geared toward veterinarians.
Increasingly, dogs, cats, and other animals are viewed as parts of the family, and people are spending more on their pets than ever before. Chewy's sales surged nearly 27% year over year last quarter to reach $2.16 billion, and the company has shifted into profitability across the first half of the current fiscal year. The company closed out the period with 20.1 million active customers, up 21% over the prior-year period.
Even better, it's clear that shoppers are doing an increasing amount of spending through Chewy's platform. At the end of Q2, existing customers had increased their spending 13.5% over the trailing 12-month period.
The company has a sizable quickly expanding market to tap into, and it's been rapidly gaining share in its industry. The American Pet Products Association estimates that people in the U.S. will spend $67.5 billion on pet food, treats, supplies, over-the-counter medicine, and other relevant categories in 2021, and Chewy's midpoint target calls for $8.95 billion in sales this year -- good for a roughly 13% market share. That's up dramatically from the 7.4% share of $47.3 billion in category revenue that it claimed in 2018.
With a large and growing user base and customers increasing their shopping dollars through the platform, Chewy has a powerful growth engine that could drive its share price much higher.
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The perfect getaway stock
Rich Duprey (Airbnb): Investors might have made a ton more money on Shiba coin in the past few months than if they'd invested in Airbnb (ABNB 0.85%), but short-term vacation rental company is a far better high-growth stock that will undoubtedly outperform the crypto over the next five years.
While still regaining its sea legs from the pandemic storm, Airbnb has a massive runway of opportunity ahead of it, not least because this niche of the travel and tourism industry is in its infancy.
Airbnb's asset-light business model means it doesn't have to pay for construction or maintenance expenses -- a competitive advantage over hotels, motels, and resorts -- but should give it better profit margins. Airbnb has only been publicly traded since last December, and it's still generating losses -- a situation the pandemic didn't help -- but its financial condition is steadily improving.
There are more than 130 million households in the U.S. and around 1 billion globally. Airbnb now has more than 4 million homeowners offering their properties for rental on the platform. And gross booking value, or the fees it charges for the stay, cleaning, and similar costs, hit $13.4 billion in the second quarter, up 320% over last year, but also 37% higher than the same period in 2019.
Wall Street forecasts that revenue will grow from $3.4 billion last year to $13.85 billion in 2025, a 32% compound annual growth rate, while adjusted earnings before interest, taxes, depreciation, and amortization will turn from a $250 million loss in 2020 to a $1.5 billion profit next year.
Yet despite producing losses, Airbnb is generating positive free cash flow, or the money its operations have left over after paying all the bills. It had more than $1.4 billion on a trailing-12-month basis after the second quarter, and with the third quarter including the peak summer month vacationing season, there's a good chance it could grow substantially.
With a total addressable market of $3.4 trillion, of which Airbnb has only a small slice, the opportunity to run circles around Shiba Inu over the next five years and beyond is great.
