Shiba Inu (SHIB 0.70%) -- the "Dogecoin killer" -- has been on an epic run. As of this writing, the meme coin has skyrocketed nearly 600% since the start of October alone and is up well over 3,500,000% since inception last summer. This return includes a more than 40% fall from its all-time high just weeks ago.
Meme coins like Shiba Inu could create mind-boggling wealth in a short period of time, but they can also turn against you just as quickly. Looking for a longer-term bet that could also create game-changing investment returns? Three Fool.com contributors think Lemonade (LMND 0.83%), Universal Display (OLED -2.06%), and Marqeta (MQ -2.92%) are worth a look. Here's why.
Image source: Getty Images.
Attempting a coup in insurance
Nicholas Rossolillo (Lemonade): Over a year since its initial public offering (IPO) in the summer of 2020, Lemonade has made quite the roundtrip. Shares are down 8% since their debut in public trade, but down 67% from all-time highs notched in January 2021. Even for individual stocks, which can swing wildly up and down, Lemonade's boom and bust thus far have been impressive.
But enough about the stock, let's talk about Lemonade the business. The company is growing its number of insured customers at a rapid pace, up to this point primarily by offering renters, homeowner, pet, and life insurance. Total customers increased 48% year over year to over 1.36 million at the end of the third quarter of 2021, and in-force premium (the value of active insurance policies) was up 84% year over year to $347 million. This is still a small insurance upstart trying to use technology to disrupt a massive global industry.
The company just made its biggest new-product launch yet, Lemonade Car, to go after the huge U.S. auto insurance market. To accelerate its nationwide rollout, Lemonade is acquiring Metromile in an all-stock deal worth about $500 million at the time of the announcement (or just over $200 million when subtracting Metromile's net cash on balance). Metromile itself has not fared well since its own IPO early in 2021, but plugging its auto insurance licenses and driver data into Lemonade's machine learning platform could be interesting.
As of this writing, Lemonade's enterprise value is at just $2.7 billion. The company operates at a steep loss (free cash flow was negative $102 million through the first nine months of 2021), so this aspiring insurance disruptor isn't for the faint of heart. However, flush with over $1 billion in cash and equivalents and no debt, Lemonade could be an incredible growth story if it can continue to expand in the years to come.
This technology has a lot of untapped market share to capture
Anders Bylund (Universal Display): Shiba Inu's 15 minutes in the limelight are almost over, as I see it. At the same time, Universal Display is only getting started on its long-term growth story -- and the stock is on a fire sale.
The developer and materials reseller behind organic light-emitting diode (OLED) screens just posted another impressive earnings report. In the third quarter of 2021, sales rose 23% year over year to $144 million and earnings increased by 14% to $0.97 per diluted share. Your average Wall Street analyst was looking for $146 million and $1.09 per share, respectively. The miss triggered a modest sell-off on UDC's already affordable shares, and the stock is still more than 6% cheaper today in comparison to the day before this earnings report.
Skeptics might argue that the report uncovered serious flaws in UDC's business, and that investors should stay away from the stock. I humbly disagree with that notion.
What Universal Display's recent reports have shown, including the fresh third-quarter update, is that the company is growing in a time of industrywide supply chain challenges. At the same time, the addressable market for OLED screens and lighting panels continues to expand and the company's screen-building partners are building out their manufacturing facilities in order to exploit this unique opportunity.
For example, Universal Display's earnings call showed that LG Display (NYSE: LPL) is shipping roughly 8 million big-screen OLED television sets this year, up from 4.5 million in 2020. LG wants to boost its TV-screen production even further in 2022. The long-term growth opportunity for power-efficient OLED screens beyond that point remains enormous, since this technology accounts for just 3% of the TV sets sold today.
So you're getting in on the ground floor of Universal Display's exciting growth story while Shiba Inu fades into the cryptocurrency market's background. This stock trades 34% below January's all-time highs and less than 6% above its 52-week lows right now. It's time to pounce on Universal Display stock while it's hanging out in Wall Street's bargain bin.
This stock has crypto exposure, but also benefits from other exciting fintech trends
Billy Duberstein (Marqeta): Cryptocurrency is a new and exciting industry, and altcoin Shiba Inu is currently having its moment in the sun, but let's face it: Shiba Inu is a really speculative bet.
Yet while any one altcoin can be risky, several exciting new fintech companies have all the potential upside of cryptocurrencies, without single-coin risk. One such company is card-issuing fintech Marqeta, which just reported earnings on Wednesday.
Marqeta had its IPO back in June, but it's an 11-year-old company and first-mover in modern card issuing. Management touts that first-mover advantage over new entrants, while also having greater agility and tech-savvy than legacy financial giants. Based on its recent impressive earnings beat, management may very well be right about that.
Thanks to its advanced application programming interfaces (APIs), Marqeta's platform allows companies to build flexible cards, both physical and virtual. Clients range from large U.S. banks like JPMorgan Chase, which uses Marqeta to help deliver digital versions of its corporate and business cards; tech platforms like DoorDash, which use Marqeta to load specific order amounts onto shopper cards; buy now, pay later fintechs like Afterpay; and more recently, cryptocurrency-related companies such as Coinbase Global, which are issuing new card products with crypto-linked spending and rewards programs.
Last quarter, revenue grew 56%, ahead of analyst expectations, and losses per share were also better than expected. Importantly, while the company is still heavily investing in operating expenses to capture its growth opportunity, gross margin expanded by three percentage points over the prior-year quarter. That's a great sign for future margins.
While Marqeta gets an outsize portion of revenue from a single client in Square, Square's concentration of revenue decreased from 72% a year ago to 68% last quarter, and customers outside the top five grew their payments volume a whopping 226%. Even since the quarter ended, Marqeta already announced several impressive new customer wins in October, which bodes well for the future.
Marqeta isn't cheap, trading at over 20 times next year's earnings estimates. But its leading position in the huge addressable market of card payments gives it long-term upside normally associated with crypto, but with more diversification across the broader fintech landscape.
