The stock market is having a forgettable 2022 so far thanks to multiple headwinds, such as the geopolitical instability in Europe, surging inflation, a contracting economy, and a hawkish Federal Reserve that has adopted an aggressive stance toward raising interest rates.
Technology stocks have been hammered big time thanks to the factors discussed above, with the Nasdaq-100 Technology Sector index down a whopping 31% this year. Not surprisingly, major technology names that have been big winners in the past have been crushed in 2022. The likes of Nvidia (NVDA -10.01%), ASML Holding (ASML -3.32%), and Twilio (TWLO -1.49%) are three such high-flying stocks that have crashed hard amid the sell-off.
NVDA data by YCharts
However, this may be a good time to invest $10,000 in these three names, as they are dominating the industries they operate in and clocking impressive sales and earnings growth. A closer look at their prospects indicates that they could turn a $10,000 investment into $50,000 by the end of 2025. Let's see why that may be the case.
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1. Nvidia
The stock market hasn't been kind to richly valued stocks in 2022. This explains why Nvidia is now trading at 44 times trailing earnings, as compared to a price-to-earnings ratio of 90 at the beginning of the year following its severe pullback.
NVDA PE Ratio data by YCharts
But Nvidia's growth hasn't cooled off and its prospects remain solid amid the stock market carnage. Analysts expect the company's top line to jump 43% in the current fiscal year, followed by a 17% jump in fiscal 2024. Its five-year annual earnings growth forecast also remains solid, at nearly 31% a year.
Nvidia finished fiscal 2022 (for the 12 months ending Jan. 30, 2022) with a 61% increase in revenue to $26.9 billion and a 78% jump in adjusted earnings to $4.44 per share. Forecasts indicate that its impressive pace of growth is here to stay. However, don't be surprised to see Nvidia clocking faster growth, given its massive addressable opportunity.
At its recently held investor day, Nvidia pointed out that it is sitting on $1 trillion worth of revenue opportunity across various verticals, such as gaming, automotive, the omniverse, artificial intelligence, and chips. The good part is that Nvidia is making notable progress on all these fronts.
In automotive, where the company sees a $300 billion addressable opportunity, Nvidia has already built a design win pipeline worth $11 billion, which it expects to materialize over the next six years. A design win denotes that Nvidia's chips have been selected for deployment in customers' automotive offerings, and the chipmaker would start generating revenue from these wins once its customers' products move into production.
As it turns out, Nvidia has built a solid customer base that includes the likes of Volvo, Mercedes-Benz, Tata Motors' Jaguar Land Rover, Hyundai, and many others in the automotive business that could help it attack the massive opportunity in this segment. Throw in Nvidia's dominant position in the gaming and data center markets, and its earnings could grow at a faster pace than Wall Street's expectations and help the stock deliver terrific upside over the next three years.
2. ASML Holding
ASML Holding holds the key to solving the semiconductor shortage. The Dutch giant's machines allow chipmakers and foundries to manufacture chips, and the company is notable for its extreme ultraviolet (EUV) lithography systems that play a key role in the manufacturing of advanced chips capable of addressing emerging applications such as the metaverse, among others.
As it turns out, ASML is the only provider of EUV machines that are in great demand right now. According to a third-party estimate, the global EUV lithography market could clock 21.5% annual growth through 2029. ASML, however, can produce around 50 EUV systems a year, which explains the company's massive backlog and the fast-growing order book.
The company had 7 billion euros' worth of net bookings at the end of the first quarter of 2022, way ahead of analysts' expectations of 3.7 billion euros. These net bookings refer to the sales orders for machines for which ASML has written authorizations. What's more, the solid increase in the company's bookings means that ASML's backlog stood at 29 billion euros at the end of the previous quarter.
ASML generated 18.6 billion euros in revenue in 2021, an increase of 33% over the prior year. So the company's current backlog indicates that its top line is on track to increase substantially and easily exceed the company's 2025 annual revenue target of 24 billion euros to 30 billion euros. Analysts expect the robust top-line growth to translate into terrific annual earnings growth of nearly 30% a year for the next five years, which could help this semiconductor stock log solid gains in the coming years and boost investors' wealth substantially.
3. Twilio
The cloud communications market is growing fast, and Twilio is the dominant player here with an estimated market share of 38% per a third-party estimate. This solid market share and Twilio's moves to increase its influence in this space through acquisitions have helped the company sustain terrific growth in recent years.
TWLO Revenue (TTM) data by YCharts
The company released its first-quarter 2022 results on May 4, reporting a 48% year-over-year increase in revenue to $875 million. Excluding acquisitions, Twilio reported organic growth of 35% during the quarter. Twilio expects to clock annual organic revenue growth of more than 30% through 2024, though it won't be surprising to see it sustain that momentum for a longer period.
That's because the global cloud communications market is expected to generate $22 billion in revenue by 2028 as compared to $4.6 billion last year. So, Twilio could keep growing at elevated levels for years to come, given that it generated $2.84 billion in revenue in 2021. More importantly, Twilio's sticky customer base and an increase in spending indicate that it is pulling the right strings to grow its business over the long run.
The company had a dollar-based net expansion rate of 127% last quarter. A reading of more than 100% indicates its customers are spending more money on its offerings by increasing their usage of Twilio's services or by adopting new services. It also has an active customer base of 268,000 customers, adding 14% new customers year over year in the first quarter.
Given the growing size of the market Twilio operates in and its robust share of the same, it isn't surprising to see why analysts expect its bottom line to grow at an annual rate of 155% for the next five years. Such terrific growth could send this cloud stock soaring and multiply investors' money significantly by 2025.
