It's a bit difficult to believe in the midst of decided marketwide weakness, but 10 years from now, 2022's swoon should be no more than a faded memory. That's why now's the time to step into beaten-down stocks of companies with solid long-term growth stories.
To this end, here's a closer look at three growth stocks poised for big gains over the course of the coming decade, if not longer.
1. Shopify
Amazon (AMZN 1.30%) pioneered e-commerce as we know it, and is the king of the industry in the western half of the world. Market researcher eMarketer estimates Amazon accounts for around 40% of the United States' online shopping business; no other online-shopping platform comes close.
As might have been expected, though, Amazon is starting to struggle with sheer size. At least 2 million sellers currently use it to connect with more than 300 million regular shoppers, who browse Amazon's listings of more than 350 million products, according to BigCommerce, a software provider to e-commerce retailers. Once an operation gets that big, it becomes unwieldy, and sellers start falling through the cracks of an inefficient (and often unfair) marketplace.
Enter Shopify (SHOP 4.90%), which empowers online merchants that want to establish their e-commerce presence outside of Amazon's ecosystem. This approach doesn't draw as many prospective customers as Amazon can. But it allows businesses to completely customize the customer's experience, from finding a product to purchasing it. It also offers sellers an opportunity to cultivate their own customer lists, rather than adding to Amazon's base, which might later see promotions of a competitor's offerings.
The idea is catching on. Last quarter, Shopify facilitated the sale of $43.2 billion worth of goods, collecting $1.2 billion in revenue for itself. Those figures were up 16% and 22% year over year, respectively -- and those are comparisons to a quarter that experienced a huge surge in online shopping due to COVID-19 lockdowns.
Analysts are looking for more of the same growth as more and more online merchants are expected to embrace the idea of operating outside of Amazon's limitations and inherent challenges.
2. Micron Technology
Computer-memory manufacturers like Western Digital, Micron Technology (MU 3.06%), Samsung, and Seagate Technology Holdings have a big problem: They struggle to maintain a happy medium between producing too much or too little, causing the price swings they're also responding to. It's true for DRAM (determining how much computing power your device has) and for NAND (drives used for operating systems or storing digital data).
If you look at the long-term picture for the NAND and the DRAM markets, though, you'll see two important details. First, the need for both never stops growing. Second, given enough time, prices eventually recover more than enough to make the business very, very lucrative.
Data from PC Matic Research puts the matter into perspective. Twenty years ago, the average desktop computer used roughly 400 megabytes (0.4 gigabytes) of DRAM -- or RAM, as it was still called then. In 2012 that number was pumped up to 3.5 gigabytes. Now, the figure tops 9 gigabytes. There's no telling how much DRAM will be standard 10 years from now, but it's not a stretch to say it's going to sustain the same exponential growth pace. Disk drive capacity has grown similarly over the past 20 years, and given how reliant we've become on our tech, there's no reason to think it too won't keep growing at a brisk pace.
All four of the aforementioned companies are fine investments, but only one is a pure-play on both the NAND and DRAM markets. That's Micron, which is producing four times as much revenue now as it was a decade ago. That growth is almost in perfect step with the growth in NAND and DRAM use during that 10-year span. That bodes well.
3. SolarEdge Technologies
Finally, add SolarEdge Technologies (SEDG 4.15%) to your list of growth stocks that could dish out big gains over the coming decade, if not longer.
While you're familiar with solar power, you might not be as familiar with SolarEdge Technologies. This company solves the still-young solar power industry's biggest problem: doing something useful with the excess energy produced by solar panels while the sun shines, and then providing enough power when it isn't shining.
Its power inverters combined with a simple smartphone app allow users to manage their energy use, and for those customers who also opted for a battery, to switch it on when the need arises. The company is even able to integrate its systems with an at-home electric vehicle charging station.
There's never been a better time to be in the solar power business. As much growth as it's seen in just the past few years, there's far more ahead. The latest report by the U.S. Energy Information Administration (EIA) says less than 3% of the nation's electricity comes from solar, while fossil fuels still handle 60% of the workload. That's a massive opportunity to shift to a far more environmentally friendly mix.
And this shift is well underway. The EIA also says that nearly half of this year's new power-production capacity will come from solar panels. That's why analysts call for SolarEdge Technologies to see top-line growth of 55% this year. That sky-high pace isn't sustainable, but the company is still clearly positioned for huge growth for a long, long time.
