Stocks with 10X potential typically have a few defining characteristics. They usually (but not always) have relatively small market caps, boast visionary leadership whose interests are aligned with shareholders, and above all, see massive market opportunities to grow into.
With that in mind, three potential 10X (or much more) stocks I'm watching as we head into 2022 are Vacasa (VCSA -4.45%), Nextdoor (KIND 1.50%), and Offerpad (OPAD 1.01%). While none are exactly low-risk investments, here's why I think all three could have massive upside potential in the years ahead.
1. Vacasa: A huge, fragmented market
Vacasa is the leading manager of vacation rental properties in the United States. Unlike companies like Airbnb, which is mainly a listing platform, Vacasa is a full-service manager. They list the property, clean it between renters, handle tenant issues, and send the owner a check each month. Plus, the company aims to maximize returns for owners through its technology.
The company is the largest player in its market, with about 35,000 properties under management. However, it's important to realize just how fragmented this market is. There are more than 5 million vacation homes in the United States alone, and Vacasa is No. 1 with less than 1% of it. There simply isn't a major brand name in vacation rentals, and that's exactly what Vacasa wants to create. And if it's successful, this $3.4 billion company could become much larger.
2. Nextdoor: A different kind of social media
Nextdoor is a neighborhood-focused social media platform that went public via SPAC merger in 2021. (Note: All three of these stocks went public via SPAC last year.) And the platform's user base has grown impressively -- one out of every three U.S. households now has a Nextdoor member, and over 30 million people actively use the platform at least once a week.
The social network has built out its features over the past few years and continues to do so, but the company is still in the early stages of monetization. Nextdoor's average revenue per user is less than one-tenth of Twitter's, just to name one competitor. However, with former Square (now Block) CFO Sarah Friar at the helm and a war chest of cash from its SPAC merger to invest into growth, Nextdoor could be a huge winner for investors if it can realize its potential.
3. Offerpad: Disrupting a $2 trillion market
Nearly $2 trillion worth of residential real estate changes ownership annually in the United States, and despite this massive market, the process for selling a house is clunky at best. If you list your home for sale, you'll have to deal with showings, staging the house, hiring an agent, holding open houses, and usually making repairs before putting the house on the market. And once it "sells," it can take a month or two to close, and there are usually contingencies (such as the buyer's ability to obtain a mortgage) that can make the deal fall through.
That's where Offerpad comes in. The company is an iBuyer, which essentially means that it buys homes directly from sellers and then sells to buyers. For the seller, this eliminates pretty much all of the pain points mentioned in the last paragraph. Offerpad makes an all-cash offer and can close in as little as three days.
In 2021, Offerpad expected to buy about 6,000 homes (we'll get the final numbers in a few weeks). The company is the most efficient of the three major iBuyers and plans to build out its complementary offerings to boost per-home revenue over time, such as by offering home insurance or warranty services. To put it mildly, if Offerpad could scale its business to its target of 3% to 4% of the homes sold in its markets and can do so profitably, it could certainly be a 10-bagger -- or much more.
Don't expect a smooth ride
None of these are what I'd call a low-risk (or even a medium-risk) stock. All are capable of 10-bagger returns, but they could also decline significantly if things don't go well. And even if things do go well, investors are likely to be taken on a roller-coaster ride as these growth stories play out. Invest with this in mind.