For the past 13 years, Wall Street has been laser-focused on growth stocks -- and with good reason. Historically low lending rates and dovish Federal Reserve policy rolled out the red carpet for fast-paced companies to thrive.
Yet even with the U.S.'s central bank fully expected to begin raising interest rates next week, innovation and opportunity should continue to drive sales for a number of growth stocks into the stratosphere. Looking about five years into the future, these are five of the fastest-growing stocks on the planet.
Image source: Getty Images.
Upstart Holdings: Implied five-year sales growth of 273%
Whereas financial stocks are typically slow-growing and cyclical, cloud-based lending platform Upstart Holdings (UPST 0.48%) is showing Wall Street what true innovation can do for a stodgy sector. According to Wall Street, Upstart's sales are expected to jump from close to $849 million in 2021 to nearly $3.2 billion in 2026.
Upstart's lending platform relies on artificial intelligence (AI) and machine learning to vet loan applicants quickly and accurately. Roughly two-thirds of the applicants using Upstart's platform receive an immediate answer. This has not only saved time and money for financial institutions, but it's actually democratized the lending process and made loans available to people who might not have qualified using traditional loan-vetting techniques.
The beauty of Upstart is that 94% of its revenue in the most recent quarter derived from fee and service revenue from financial institutions. Since it has no direct lending exposure, rising interest rates and the fear of an economic slowdown or recession won't directly affect the company.
What's more, Upstart's addressable market is massive. Although it's primarily focused on personal loans to this point in its existence, it's begun pushing its AI-based lending platform into auto loans following its Prodigy Software acquisition. The sky really does seem to be the limit for this innovative company.
A Nikola Tre electric semi. Image source: Nikola.
Nikola: Implied five-year sales growth is infinite
If you thought Upstart's 273% expected sales growth over the coming five years was impressive, check out electric vehicle (EV) manufacturer Nikola (NKLA -1.89%). Last year, Nikola didn't recognize any revenue. But by 2026, Wall Street is forecasting $4.9 billion in sales. Your calculator would label that as infinite sales growth.
For the moment, Nikola's key driver is the rollout of its battery EV (BEV) and fuel-cell EV (FCEV) semi trucks. A few of these test trucks have already been delivered, with the company noting in its fourth-quarter operating results that it had received a couple of notable letter-of-intent orders. With most major global economies aiming to fight climate change, convincing enterprise fleets to go green won't require a lot of arm-twisting. In other words, Nikola and its EV peers are certainly in the right place at the right time.
However, Nikola's parabolic sales growth also comes with a number of question marks. For example, former CEO Trevor Milton was indicted on three counts of fraud last July for allegedly misleading investors (making inaccurate statements about pre-orders). This bad PR has put quite the dent in Nikola's reputation.
Making matters worse, the company was forced to abandon its BEV/FCEV truck known as the Badger before it even rolled off assembly lines. It's simply not clear if Nikola will have sufficient capital to see the light of day come 2026.
Image source: Getty Images.
Opendoor Technologies: Implied five-year sales growth of 336%
Another growth stock expected to see a rapid increase in revenue over the coming five years is iBuying platform Opendoor Technologies (OPEN -4.48%). Last year, Opendoor crested $8 billion in annual revenue. By 2026, Wall Street is forecasting nearly $35 billion in sales. That's good enough for a 336% increase.
iBuying describes the process whereby a real estate company will purchase a home for cash, thereby removing the haggling and hassle that typically accompanies selling a home. What Opendoor does is charge a 5% fee based on the sales price of a home, and deduct any expenses related to repairs prior to selling. This fairly high service fee and repair expense clause ensure that the company can handle fluctuations in home values.
Also of interest is the fact that Zillow exited the iBuying business. Zillow noted that it wasn't able to accurately calculate the value of homes in its inventory, which caused it to take losses on its iBuying segment. Opendoor has had no such issues valuing the homes it's purchased, held, or sold. In fact, the company more than doubled the number of U.S. markets it's operating in to 44 over the past year.
Although Opendoor could see some turbulence in the near term as mortgage rates rise significantly for the first time in a long time, the company's operating model is on the leading edge of innovation in a sector ripe for disruption.
Image source: Getty Images.
Trulieve Cannabis: Implied five-year sales growth of 349%
The cannabis industry can deliver stellar growth, too, with research firm BDSA forecasting a rough doubling in global weed sales between 2021 and 2026. In particular, U.S. multi-state operator (MSO) Trulieve Cannabis (TCNNF 0.42%) is forecast to see its sales climb from $522 million in 2020 (the company hasn't reported full-year sales for 2021 yet) to approximately $2.35 billion by 2025.
What makes Trulieve so unique is the company's approach to expansion. Most MSOs have been opening a few dispensaries or production facilities in numerous legalized markets. While Trulieve does have a presence in 11 states, it's primarily spent its time focusing on medical marijuana-legal Florida. Of the company's approximately 160 operating dispensaries, 112 are in Florida.
Saturating the Sunshine State with retail stores has its perks. It's allowed Trulieve to gobble up half the state's dried flower and oils market share, all while keeping marketing expenses way down. As a result, Trulieve Cannabis has been profitable on a recurring basis for more than three years.
The company is also making waves on the acquisition front. Last year, it closed the largest U.S. pot buyout in history when it acquired MSO Harvest Health & Recreation. Though this deal gave the company a bigger presence in the Mid-Atlantic, the real prize is now having the leading share of the adult-use legal Arizona market.
Image source: Getty Images.
Ocugen: Implied five-year sales growth is infinite
Last but not least, clinical-stage biotech stock Ocugen (OCGN -6.80%) will look to match Nikola in the infinite sales growth column. After Ocugen recorded no sales in 2021, Wall Street is looking for the company to generate $623 million in full-year revenue by 2026.
Even though Ocugen's company name alludes to its research on various eye diseases, the buzz surrounding the company has to do with COVID-19 vaccine Covaxin. Covaxin was developed by Bharat Biotech in India and achieved a 78% vaccine efficacy in a late-stage study of 25,800 trial participants. It's been given emergency-use authorization in India, as well as by the World Health Organization.
Ocugen fits into the picture due to its commercialization agreement forged with Bharat Biotech in the U.S. and Canada. But herein lies the opportunity and problem. The U.S. and Canada have already spent billions on COVID-19 vaccine stockpiles, and there are a multitude of approved and in-review vaccines that offer better vaccine efficacy than Covaxin. Without U.S. and/or Canadian approval, Ocugen isn't going to see any sales from its commercialization agreement.
Ocugen's best chance of long-term success is its ocular pipeline. Unfortunately, that's still a long way away from generating any recurring revenue.
