Since 2020, many investors have developed exceptionally high expectations for the stock market because of the jaw-dropping performances of some companies. Fulgent Genetics (FLGT 0.39%), for example, gave investors over 763% returns from the start of 2020 to March 2021. Other stocks acted similarly, which lulled many investors into a false reality where astronomical returns were the benchmark.
However, these back-breaking spikes in stock prices are not typical. Over the past decade, the S&P 500 has delivered 219% returns to investors. Therefore, if investors want to turn $250,000 into $1 million in a decade, that would require robust, market-beating returns of 300% (a fourfold gain), which is no easy task. While this would be difficult, I see three companies that have a good chance of accomplishing this.
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1. Roku
Roku (ROKU 5.41%) has certainly been an underwhelming performer, falling 68% over the past year. This has mostly been because of the short-term supply chain issues in the TV industry. Roku is one of the leading streaming platforms for consumers, allowing users to easily toggle between their favorite streaming channels. However, due to supply chain challenges in the U.S., TV sales dropped like a rock in the fourth quarter. This is a big problem for Roku. After all, if consumers can't buy new high-tech TVs, Roku can't add prospective customers.
That said, the company's long-term vision is still on the right trajectory. Roku sees a future where all TV is streamed, and the shift from cable to streaming services like Disney (DIS 1.54%) is still moving rapidly. Top cable providers and other traditional pay-TV services lost 1.3 million customers in third-quarter 2021, with the majority of those users shifting to streaming services, according to Leichtman Research. Importantly, Roku is one of the leaders in the streaming platform market, with over 60 million consumers using its platform as a hub for their streaming providers in Q4.
Many investors focus on the short term, which is why the stock price has been slashed. This has created an appealing prospect for long-term investors to get a high-quality business at a low price. Roku trades at just a little more than six times sales -- its lowest valuation since early 2019. Roku would become worth $64 billion if it grew four times in size from its current market capitalization of $16 billion. This is only slightly higher than the all-time highs it reached in 2021, so the idea that it could expand fourfold over the next decade is not out of the realm of possibility.
2. Global-E Online
Global-E (GLBE 3.82%) also has the potential to deliver robust returns over the next decade with its extremely valuable services for small and medium-sized e-commerce businesses (SMBs). The company provides services that help them maneuver the frictions that SMBs have when selling their products internationally. This includes shipping, payment, language, and currency barriers.
This assistance is in high demand, and Global-E has benefited. In 2021, revenue soared 80% year over year to $245 million. Importantly, as Global-E's customers get bigger, they choose to continue working with the company instead of developing an in-house solution. The company's net retention rate in 2021 was 152%, meaning that customers from 2020 were spending 52% more last year, and the churn rate was just 2%.
Global-E recently partnered with a leading e-commerce company, Shopify (SHOP 4.90%), to offer its services to Shopify merchants. These merchants collectively generated over $175 billion in gross merchandise volume (GMV) in 2021. Global-E had less than $1.5 billion running through its platform last year, so this is a major opportunity for the company here.
To expand fourfold in size from here, the company would have to grow from the $5 billion market cap it is today to $20 billion. But considering the potential it has with Shopify and the impressive growth rates it currently has, this could be feasible over the next decade.
3. Upstart
This artificial intelligence (AI) powerhouse has taken the personal loan industry by storm, and it has seen remarkable success in upending the traditional way that consumers get approved for credit. Upstart (UPST 3.90%) factors in over 1,500 variables and over 21 million repayment events to give a better determination of creditworthiness compared to traditional methods that large banks use.
By partnering with small banks and credit unions and getting paid per loan determination it makes, Upstart can offer prime credit to more Americans while exposing investors to less credit risk than if it were to originate the loans itself.
Its AI has been adopted quickly: In Q4 2021, the company made determinations on $4 billion worth of loans, which represented a 220% year over year increase. Despite this expansion, it's peanuts compared to the total opportunity ahead. Upstart estimates its total addressable market, mainly personal and auto loans, to be worth $823 billion a year.
Most companies that are growing at triple-digit rates have nosebleed valuations, but not Upstart. It trades at six times forward sales. Factoring in the potential size of the market it operates in and how rapidly it is maturing, I wouldn't be surprised if Upstart blows investors away over the next decade.
