The S&P 500 has had an annualized return of 10.9% per year over the past 50 years or so. When you factor in inflation, that annualized real return drops to about 6.8%. At that rate, the market doubles in value every decade or so. While those results are impressive (even more impressive is the S&P 500's 12% annualized real return in the past decade), I believe there are two companies currently trading that could perform even better than any of these averages over the next decade.
Both fuboTV (FUBO +0.00%) and Snowflake (SNOW 4.15%) have become major disruptors in their industries, and both companies' products have already begun to see rapid adoption. Here's why I think fuboTV and Snowflake could provide amazing returns over the next decade. Let's see if these two companies have what it takes to triple your investment.
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1. fuboTV: Enabling complete cord-cutting
While some streaming media services focus on series and movies (think Netflix, for example) and other rivals might offer some live sports (Walt Disney's ESPN+, for example) very few streaming companies focus primarily on live streaming the way fuboTV does. Along with the standard network favorites, it offers live streaming of 10 different sports across the world. The desire to watch sporting events live might be one of the primary reasons that many people keep their cable subscriptions. But fuboTV is giving them a way to break that thread.
In the third quarter, fuboTV's subscriber base grew 108% year over year and 39% sequentially to more than 1 million. Revenue grew 156% to $157 million, driven by subscriber growth and user engagement -- users watched 284 million hours of TV on the service compared to 133 one year ago.
FuboTV is trying to do more than just sports streaming, however. It also wants to create a hub for sports betting. This month, it launched Fubo Sportsbook -- an integrated platform where users can seamlessly bet on sports in real-time while watching the game on the Fubo platform. This integrated experience is meant to provide a frictionless, simple experience for gamblers. It's currently only available in Iowa, but the company plans to soon expand into four additional states where it has sports betting licenses.
A major factor that could slow this company is its path to profitability. It lost $106 million in the third quarter, and its free cash flow was negative $147 million for the first nine months of 2021. The good news is that fuboTV's net loss only increased by 61% compared to top-line growth of 156%, so its net loss margin is improving. Nonetheless, given the immense competition it faces from Alphabet's YouTube TV and other deep-pocketed rivals, the magnitude of its losses is a big concern.
The company has tough challenges to overcome and the concerns mentioned above are likely why its stock has fallen over 60% off its 52-week highs. But fuboTV is showing successful penetration of its massive market. Its sportsbook service will provide an extra benefit, enabling it to attract a very specific customer base to the platform. By providing seamless integration of wagering with minimal friction, the company has the potential to become a primary hub for sports betters and live sports enthusiasts alike.
The company has more than 1 million subscribers, yet there are still over 72 million traditional TV users available to market to. To triple investors' money over the next decade, fuboTV has to attract more customers while improving its net loss. It has shown success doing this so far, and with its new addition of the sportsbook) which will likely attract new users faster than ever before), I think that the company could continue its trend.
2. Snowflake: Mobilizing data
Data analytics platform Snowflake is doing something much more revolutionary than fuboTV is. Companies are getting more data from their software than they ever have before, and to capitalize on it, they need better ways to manage and analyze it. Snowflake helps companies analyze their data no matter where it's stored -- whether it's on Amazon's S3, Google Cloud, or elsewhere, Snowflake can mobilize all of it, bring the data to them, and make it easy for them to analyze. That platform neutrality makes it unlike any of its competitors.
The differentiator has made Snowflake's services incredibly valuable for businesses. It has attracted nearly 5,000 customers, 116 of which spend over $1 million with it annually. On average, including churn, Snowflake's customers are spending 69% more on its services today than they did one year ago, and its customers have contracts to spend over $1.5 billion more on its platform in the future, suggesting the company will enjoy continued strength for many years.
For investors, the downside of Snowflake is its astronomical valuation. The company trades at 119 times sales, but in today's frothy market, investors shouldn't expect a company with this much potential to trade at a bargain price.
According to management, Snowflake has a $90 billion market opportunity of which it has only scratched the surface. For its fiscal 2022, which will end on Jan. 31, it expects to report revenue growth of 92% to $1.1 billion, which would only represent 1.2% of its total addressable market. This company's software is encouraging companies to shift to the cloud as fast as possible, and it has the potential to help every business become cloud-native.
The company's neutrality in this crowded space has the potential to attract the biggest spenders in the market, and this potential would allow the business to vastly grow its revenue base. Snowflake already has more than 40% of the Fortune 500 as customers, and nothing is stopping it from getting all 500. If Snowflake can continue increasing its customer base and its spend per buyer to grow its market penetration -- which it has been incredibly successful at -- the company could triple investors' money and maybe even grow it more than that.
