With 2021 in the rearview mirror, it's time to look forward. The new year will bring new challenges and probably some older challenges, like supply-chain disruptions caused by the pandemic. Opportunity may present itself as the world progresses in its battle against COVID-19.
Several effective treatments have been developed, and if all goes well, there's a chance to make significant progress against the virus. With that backdrop, here are three excellent growth stocks you can buy in January.
Image source: Getty Images.
Pinterest (PINS 1.02%) is an image-based social-media company. The site is free to join and use. Pinterest only makes money by showing advertisements to users. In that regard, Pinterest has an opportunity in both the near term and the long term.
In the near term, advertisers could begin ramping up advertising as supply-chain bottlenecks ease. Many small and large businesses find themselves in situations that are causing them to reduce advertising. For instance, if you have difficulty producing enough to keep up with organic demand, advertising is unnecessary.
In the long term, Pinterest operates in a global advertising industry estimated to be worth $763 billion in 2021. Moreover, an ever-increasing share of that spending is moving online.
Over the last three years, Pinterest grew revenue from $473 million to $1.7 billion. Pinterest's rapid growth inside a massive market is an opportunity for long-term investors.
Chegg
Chegg (CHGG -3.81%) is an education technology company that primarily serves college students. Its business model has given it a competitive advantage that keeps on growing.
Students pay a monthly subscription fee and get the privilege to ask 20 questions per month to Chegg-provided experts. These questions and answers are available for all Chegg subscribers who may wish to use it for study.
Over the years, Chegg has built an extensive database of this type of proprietary content -- 70 million pieces, to be precise. This content serves as a low-cost acquisition tool. Students will typically search online if they have difficulty with a concept in their studies. If Chegg has what they're looking for, it pops up in search results, and a few clicks later, Chegg has a new subscriber.
In its most recent quarter ended Sept. 30, Chegg had 4.4 million subscribers, up from 3.7 million from the same time the year before. The subscriber growth has caused revenue to increase from $255 million in 2017 to $644 million in 2020, and operating profit to increase from negative $23 million to $57 million in that same time.
Netflix
The streaming pioneer has been an excellent growth stock for investors over the last five years. The stock is up 389%, as Netflix (NFLX -0.08%) has grown revenue from $6.7 billion in 2015 to $25 billion in 2020.
The massive recurring revenue Netflix generates is a competitive advantage. As of its most recent quarter ended Sept. 30, Netflix is on a $30 billion annual revenue run rate, which means it can sustain a content budget larger than almost all streaming competitors. Of course, new movies and series hitting the platform regularly will attract new subscribers and retain existing ones. It will be difficult for any streaming service to knock Netflix out of the lead at this scale.
Even while spending billions on content, Netflix generates significant growth in operating profit. From 2015 to 2020, operating profit increased from $306 million to $4.6 billion.
Pinterest, Chegg, and Netflix have proven to grow revenue for several years. Moreover, they each have the potential to sustain the increase. If you're looking for growth stocks to buy in January, Pinterest, Chegg, and Netflix could be excellent choices.
