Most growth stocks have rebounded considerably from their lows over the past couple weeks, but there are still a surprising number of companies trading for less than half of their recent highs. And some of them are excellent businesses with great opportunities ahead of them.
Three stocks in particular that look intriguing from a long-term perspective right now are Etsy (ETSY 1.37%) and Redfin (RDFN +0.00%), both of which could produce 10x returns over the next 10-15 years if they can realize their potential. Let's take a closer look at each of these, and at why they could be excellent bargains for investors with the risk tolerance to ride out any short-term headwinds.
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A leader with tons of growth potential
Etsy has evolved from a niche marketplace for crafts and handmade products to the destination for unique products. Not even Amazon, which launched its own handmade-goods platform several years ago, could derail Etsy's growth trajectory.
Etsy has a massive reach, with 5.3 million active sellers listing 100 million items in 2021, and 90 million buyers making at least one purchase. Since 2018, Etsy's gross merchandise sales volume has grown by about 150%, more than triple the growth rate of overall U.S. e-commerce.
Despite its impressive growth, Etsy could still have a ton of runway ahead of it. The company's 2021 volume represents less than 3% of the online spending in its product categories, and if we include offline spending that could move onto Etsy's platform, there's a $2 trillion opportunity in the countries where Etsy operates. With a combination of organic growth and acquisitions, Etsy's business could certainly grow to 10 times its current size over the next 10-15 years.
NYSE: ETSY
Key Data Points
Real estate is in need of serious disruption
There's perhaps no industry that is as ripe for disruption as real estate. The processes of buying and selling homes are clunky and full of consumer pain points. And while most fees for services in other industries have trended downward in recent years, the bulk of real estate sales still take place with the same 6% selling commissions that have been the industry standard for decades.
Redfin aims to disrupt real estate from all angles. Its core business is a technology-focused real estate brokerage platform that makes agents' jobs easier and saves sellers thousands of dollars in commissions. Since 2017, Redfin's brokerage business has grown from a 0.67% share of the U.S. home-selling market to 1.17%, as home sellers are clearly finding value. And with Redfin's typical agent earning 2.7 times the industry's median, the company has a big edge when attracting top talent.
NASDAQ: RDFN
Key Data Points
In addition, the RedfinNow iBuying platform buys homes directly from sellers, makes repairs, and aims to sell them for a profit. iBuying is still in the early stages of its evolution, but this is clearly a high-potential business and RedfinNow's volume has nearly quadrupled over the past two years.
After falling by about 75% from its 52-week high and trading at a price-to-sales ratio of around 1, Redfin could be a steal if its business continues to take market share from the legacy players.
These aren't low-risk stocks
No stock that has 10x return potential and can fluctuate in price by over 50% within a year is a low-risk investment, and these three certainly aren't exceptions. But for patient investors who have relatively high risk tolerance, the risk-reward dynamics of these three companies make a lot of sense at their current share prices.
