Life as a growth stock investor hasn't been very much fun lately. Inflation and the eventual rise in interest rates continue to push against many small and mid-cap growth stocks, which are reaching new lows week after week.
But there's an argument to be made that the kitchen sink that investors are throwing out might have some gems in it. That's right: There are stocks with the long-term potential to grow tenfold hiding in plain sight. Consider buying these three stocks now, and you might look like a genius later on.
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1. Fiverr International
According to research by Upwork, more than 50% of the U.S. population could participate in freelancing by 2027, making it a permanent staple in the economy instead of a pandemic fluke. Fiverr International (FVRR -1.44%) operates a marketplace platform where freelancers and buyers do business.
Fiverr benefited from the lockdowns in 2020 as people leaned more heavily on online businesses and freelancing to make ends meet. The company's revenue grew 77% year over year in 2020, an uptick from the 42% increase in 2019. However, the stock price ran ahead of its growth, pushing its price-to-sales (P/S) ratio skyward, going as high as 56 in early 2021.
FVRR PS Ratio data by YCharts
The sell-off in growth stocks also impacted Fiverr, bringing the stock's P/S back down to pre-lockdown levels at less than 11. Meanwhile, revenue growth remains solid following its pandemic surge; analysts expect the 2021 fiscal year to end with revenue up 55% year over year, and 2022 revenue estimates call for 26% growth. I think the long-term development of freelancing could give Fiverr an opportunity to continue its upward trajectory for years, and the stock's $3 billion market cap is still tiny compared to its potential upside.
2. Marqeta
Innovative companies like Uber for ride-hailing, DoorDash for food delivery, and Block for digital banking have changed life for the consumer over the past decade. However, all of these companies need unique solutions for handling payments and moving money. Payments technology company Marqeta (MQ 1.48%) enables companies, including some of its customers listed above, to build and customize payment solutions through its software application programming interface (API).
Marqeta is like a middleman between these new payment applications and the existing payment networks of the financial system such as Visa and Mastercard. Marqeta helps these two sides work together. It went public via an initial public offering (IPO) in June 2021, and its stock now trades below its IPO price due to the marketwide chaos.
MQ PS Ratio data by YCharts
The stock's P/S ratio has fallen from more than 40 to a much more reasonable 12 in just over six months. The company is thriving, posting 56% year-over-year revenue growth in its 2021 third quarter. The company's biggest customer is Block, which accounts for more than 70% of revenue, but it serves many companies in the surging buy now, pay later industry, which could help drive growth. The stock's market cap is a measly $7 billion in the massive payments industry, so I like the long-term potential.
3. Global-E Online
E-commerce isn't a new investing theme; Amazon has grown like a weed for the past 20 years. But e-commerce has remained very isolated, meaning that it's tough for someone in one country to shop online in another. Global-E Online's (GLBE 0.78%) platform helps enable direct-to-consumer cross-border e-commerce. Its platform localizes language, pricing, taxes, and logistics to make the shopping experience smoother for shoppers.
Shopify bought 5% stake in the company, using its platform for cross-border transactions. Global-E has also partnered with Meta Platforms; these deep-pocketed companies have chosen to outsource cross-border commerce to Global-E instead of trying to compete with them, which I think speaks to the product. Its net revenue retention rate is 140%, signaling that Global-E's customers spend more once they join.
GLBE PS Ratio data by YCharts
The company just went public in mid-2021, so it's another young business that needs to prove itself over time. However, analysts expect $240 million in revenue for the entire 2021 year, and 53% revenue growth in 2022, against a total addressable market that management estimates is worth $736 billion. At a market cap of just under $6 billion, Global-E's story could just be getting started.
