Investing in cryptocurrency has been a highly risky investment that has more than paid off over the past decade. If you invested in Bitcoin (BTC -1.10%) in 2017, you would have had over a 5,000% return.
Crypto still has plenty of room to run, but I think that these stocks could do better. Here's why I think that Riskified (RSKD 3.19%), Pinterest (PINS 4.04%), and Latch (LTCH -1.30%) could outperform every cryptocurrency over the next decade.
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1. Riskified: Making e-commerce safer
Riskified is helping e-commerce companies like Wayfair (W 2.08%) determine and detect fraud using artificial intelligence. Riskified's AI can detect fraud at scale within seconds, which many e-commerce companies cannot do. Its AI has been critical for its customers -- the top 10 customers are spending an average of 39% less on operating expenses while making 8% more sales with Riskified.
Riskified's key competitive advantage is assuming all the risk on its determinations. If Riskified permits a fraudulent order, Riskified will pay its customer for the order. This chargeback guarantee takes all of the risks off the e-commerce companies, giving them no reason not to use Riskified. As a result, Riskified has less than 2% customer churn, and its gross merchandise volume (GMV) under management reached $21 billion, growing 28% year over year.
The e-commerce market is expected to rapidly expand over the next three years, going from $4.3 trillion in global GMV today to $6.4 trillion in global GMV by 2024. The company had just $60 billion in annual GMV in 2020, so the market for the company is limitless. With such a large opportunity ahead of itself and a major advantage that breaks down the barriers to onboard customers, I think Riskified's business could massively expand over the next decade and reward shareholders along the way.
Although the company is not yet profitable, the opportunities it provides for e-commerce businesses and low customer churn could result in more revenue in the future. If the company can capitalize on these factors it could ultimately become a money maker.
2. Pinterest: Bringing ideas to reality
Pinterest has nearly 30% of the U.S. population on its platform, and now it is working hard to monetize its users. The company has taken steps like launching Pinterest TV, which makes it easier for the 89% of users who say they use Pinterest with the intent to buy items to complete their purchases.
Compared to other social media companies, Pinterest has barely scratched the surface of its opportunity. Snapchat (SNAP 27.63%) has an average revenue per user (ARPU) of $3.49 globally, and Meta Platforms' (META 0.43%) global ARPU is $10. Pinterest, however, only had a third-quarter global ARPU of $1.41. This was because Pinterest's international ARPU was just $0.38, compared to Snap's $0.98 and Facebook's $3.14.
The company has struggled to retain and grow its user base, but that is not the key focus for Pinterest. Yes, retaining users is important (you can't monetize zero users), but the goal should be to increase the company's ARPU. If the company can use its unique platform where users actually want to be advertised to -- which cannot be said about its competitors -- and meaningfully increase its ARPU, I think the company could grow 10x from today.
3. Latch: Eye in the sky for apartment managers
Latch provides software and smart locks that allow apartment managers to easily ensure security for their tenants. The real prize is the software, which allows apartment managers to regulate tenant and guest access, monitor tenant movement, and manage deliveries. This unique software can only be used with its keyless smart locks, which have amazingly high switching costs. This has resulted in zero customer churn since it started operations in 2017.
Latch makes deals with apartment managers before apartments are even built, so its partnerships with Avalon Bay (AVB 0.07%) and other apartment builders are critical. These partnerships are what get Latch in the door, and they are also part of the reason that 30% of the new apartment buildings under construction today will have Latch installed in them.
The company expects that its 2021 revenue will be $40 million, which is a speck of dust compared to the $54 billion addressable market that the company sees in the U.S. alone. Even if the company generates 100x its revenue over the next decade, the company would have less than 8% market share, demonstrating how much room the company has left to go. Latch is the only company with a full suite of smart locks and software along with high-quality partnerships. If it can fully utilize those advantages, Latch has the opportunity to grow a hundredfold from here and maybe even grow larger than that.
They may be down but don't rule them out
Despite all of their potential, there are tremendous risks associated with each business. Riskified and Latch are young businesses that have yet to prove their business models. While they have several advantages that make them stand out, it will be critical for those companies to continue innovating and changing their industries for the better. Pinterest has had a rough time, and if the company's investments in new technology don't increase monetization for the company, it could be the final blow.
Like Bitcoin in 2017, these stocks are high risk but offer a very high reward if they can succeed, and I think their respective edges will allow them to do so. These stocks are valued at high prices because of their large potential over the next decade.
LTCH PS Ratio data by YCharts
All stocks have fallen off their highs, which has made these stocks much cheaper, but they are still expensive nonetheless. However, I think these valuations are worth paying for because of the huge chance for reward. If these companies can rule their industries, these companies could provide returns that crush any cryptocurrency over the next decade.
