If you have some extra holiday cash this year and you're looking to invest it, you might want to consider high-growth stocks. Fast-growing companies are typically operating in extremely large industries, and if their success continues throughout the next five years, they could be amazing investments.
I have two stocks that fit this description. Sea Limited (SE 1.20%) and SEMrush (SEMR -1.44%) have both been impressive growth stocks in 2021, and this will likely continue into 2022 and beyond because of their strong competitive advantages. Smart investors look for these kinds of high-quality stocks at major discounts, and that is what we have today. Both stocks are more than 30% off their all-time highs this year, providing a prime buying opportunity. Here's why I think these companies are great buys right now.
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Sea Limited: A global e-commerce giant in the making
Sea Limited is synonymous with high growth. It has been able to grow its revenue by 2,620% since 2015, and despite being a $122 billion company, it still grew its top line by 122% in the third quarter. This is because Sea has three successful revenue streams: gaming, e-commerce, and digital payments. While both its gaming and digital payments segments have massive opportunities ahead of them, the company is especially focused on its e-commerce arm, where it wants to become a global powerhouse.
Sea Limited's Shopee has become the prevalent e-commerce platform not only in Southeast Asia but in Brazil. In Southeast Asia, Taiwan, and Brazil, Shopee was the top-ranked shopping app on the Google Play Store in terms of time spent on the app in Q3. The company was also the second most popular shopping app in terms of downloads and monthly active users globally, but it is making efforts to become even bigger.
Sea Limited has announced that Shopee is expanding into France, Poland, Spain, and India, making its intentions of becoming a global e-commerce company clear. This now puts Shopee on three continents across the world. The company will face competition from primarily Amazon in Europe, so not all of its endeavors might be successful. However, Shopee's incredible success so far in Southeast Asia and Brazil could indicate that it will put up a strong fight.
This rapid expansion unlocks a massive global e-commerce market for Sea Limited. The estimated global volume of e-commerce sales in 2021 is expected to reach $4.9 trillion. Additionally, this figure is expected to grow to $7.4 trillion in 2025, according to Oberlo.
With such a large market opportunity and a strong resume in Southeast Asia and Brazil, I have confidence that Sea will see success in Europe. The company trades at 14 times sales, which is a steal considering Sea is consistently growing its top line at triple-digit rates. I think Sea Limited could reward shareholders immensely over the next decade if it can continue its winning ways across the world.
SEMrush: A marketer's toolkit
If you're on a marketing team, you may have struggled to decide where the right places to advertise are. Building, managing, and monitoring numerous advertising channels to make sure that you are effectively reaching your target audience can be difficult, and SEMrush helps you with that.
SEMrush enables over 79,000 customers in 143 countries (including the world's largest companies like Tesla and Apple) to monitor their marketing success. And with 50 tools to help them do so, it is the far-and-away leader in this space. Many of its competitors are smaller, niche providers that focus on one specific tool like search engine optimization marketing, but SEMrush allows customers to get the full scope of their marketing strategy.
This industry-leading position and product optionality has led to impressive Q3 revenue growth of 53% year over year to $49 million. Its net retention rate has also improved, up to 124% in Q3 compared to 121% in Q2 -- indicating decreasing churn and increasing spending per user. While 40% of its revenue goes toward sales and marketing expenses, its dominance in the space has allowed SEMrush to be roughly breakeven in terms of profitability.
The company is expecting full-year revenue of $816 million, which pales in comparison to its $20 billion future addressable markets. With its strong grasp on the space because of its wide-ranging product offering, I think that SEMrush could capitalize on this massive growth runway. The company trades at 17 times sales, but with this much room to run and a dominant platform, I am willing to pay up.
