The stock market is packed with excellent investment ideas right now. Some of the finest companies I know have seen their share prices slide way down since the inflation panic started in November 2021.
As an example, the three companies listed below are pioneering innovators with fantastic long-term business prospects. The inflation crunch may hurt for a while, but they are in a position to disrupt their target markets. Yet, their stocks have suffered giant corrections in recent months. When you put tremendous growth prospects together with bargain-bin stock prices, it adds up to no-brainer buying opportunities.
NYSE: LMND
Key Data Points
1. Sweet, sweet Lemonade
The insurance industry is incredibly ripe for disruption. Getting the right insurance plans to fit your needs can be a difficult process, and nobody likes to pay huge premiums to protect their cars, homes, or other properties. When the time comes to file a claim, that can be a downright hostile experience. Yet, some of this coverage is required by law, so there's no way around it.
That's where Lemonade (LMND +3.98%) comes in.
This company wants to take the pain out of insurance by automating everything. Using artificial intelligence (AI) and machine-learning tools, Lemonade analyzes risks, insurance plans, and outcomes from the past to shape the renters and auto coverage plans of the future. You sign up through an online form, claims are settled by machines, and you don't have to fight human insurance agents to get what you need out of Lemonade's services. These are early days in Lemonade's ambitious growth story. The company is unprofitable, but top-line sales are skyrocketing:
LMND Revenue (TTM) data by YCharts.
Don't let that plummeting earnings chart scare you away. Economies of scale are about to kick in, and the company is only getting started in the auto insurance market. Lemonade's management team expects the next quarter to show record losses, followed by a sustained uptrend. In the long run, this AI-powered business model should translate into low operating costs and near-optimal risk management. Just give those computers some time to learn the ropes.
And the target market is gigantic. Lemonade's revenues added up to just $171 million over the last four quarters, based on $110 million in net insurance premiums. Sector giant Progressive collected net premiums of $46.9 billion and revenue of $47.7 billion over the same period. Lemonade can build a massive business by taking just a tiny handful of customers from Progressive and friends. I believe that the company will achieve much more than that in the long run, so the stock is a no-brainer buy today.
NASDAQ: OLED
Key Data Points
2. Universal Display is already everywhere
And the future looks even bigger. I'm not kidding.
Organic light-emitting diode (OLED) screens are already found in pretty much every high-end smartphone worth its salt, including the entire Apple iPhone line. The technology is also familiar in mid-range handsets nowadays. OLED panels are also making inroads in the living room, starting with top-shelf TV sets. Next, we should see OLED-based lighting panels making a similar journey from pricey novelty to an everyday necessity.
Universal Display (OLED +0.70%) develops the technology behind those ultra-efficient OLED panels, doling out licenses to screen builders around the world. The company also acts as a materials reseller, controlling the supply of the chemicals that go into making these ultra-efficient digital screens and lighting panels.
Generally speaking, Universal Display's royalties and material fees are based on the total area of OLED panels that are built with its technology. That's why big-screen TVs are such a powerful upgrade from the small-screen world of tablets and smartphones.
And like I said, that's just the beginning. In the long run, I expect to see OLED panels in essentially every place you'd use an LCD screen today -- and more. You see, OLED screens can do things that old-school displays would never dream of. For example, you can bend or roll up an OLED screen with the right type of surface materials or build transparent screens where the image appears to float in mid-air. And yeah, the pixels emit their own light, as the technology's name implies, which is why you can use them for household lighting.
OLED is an exciting technology with numerous real-world use cases, and I can't wait to see where Universal Display will go from here. The company is turning the concept of video screens upside down and inside out.
NASDAQ: NFLX
Key Data Points
3. Netflix is just taking a chill pill
Good old Netflix (NFLX +0.16%) has changed the world before. Its iconic red DVD mailers smashed the video store industry more than a decade ago. Netflix could have rested on its laurels but chose to abandon the DVD rentals space altogether when broadband internet connections became fast and common enough to support an all-digital video-streaming business instead.
Almost exactly 11 years after the Qwikster event established video-streaming as a serious business operation for Netflix, things have changed. Netflix is still the global leader in streaming media subscribers, award-winning content productions, and digital media revenues. Walt Disney is catching up fast, but with a lower-priced subscription service that is automatically easier to sell in a price-conscious market. Other rivals are attempting to set up shop as producers of top-quality TV shows, family-friendly fare, and other niches. But Netflix is running far ahead of the competition, paving the way to tremendous business growth as the streaming industry takes the baton from cable, broadcast, satellite, and movie theater publishers.
In fact, Netflix stands at an important crossroads right now. The company is shifting its focus away from maximum subscriber growth and toward profitable growth for the long haul. Many investors have failed to notice this crucial strategy update, and this misunderstanding led to a massive share price drop when the seemingly all-important subscriber growth slowed down in 2022.
So Netflix is exploring new products while focusing on bottom-line profits and top-line revenues with a newfound intensity. The stock is now trading 68% below last November's all-time highs, exploring share prices not seen since early 2018. At the same time, the core business is healthier than ever. Netflix's trailing earnings before interest, taxes, depreciation, and amortization (EBITDA) stand at $20 billion today -- equal to the company's total sales in 2020.
NFLX Revenue (TTM) data by YCharts.
Netflix is going places, and the massive sell-off in 2022 made no sense at all. We are looking at a game-changing investment opportunity here, folks. I have been adding to my Netflix holdings over the summer, and I highly recommend you do the same. Digital media is the future, and Netflix is leading the way there, even if the stock chart is sending different signals.
