Are you looking for stocks with explosive growth potential? I can think of three that are poised to soar on the back of mighty powerful trends.
Generative artificial intelligence, ad-supported video streaming, and aging demographics in developed countries are three unstoppable trends that could drive the prices of these stocks higher for many years to come.
Read on to see how buying them now and holding them over the long run gives you a pretty good chance to realize market-beating gains.
1. Fiverr
The online marketplace for freelance work, Fiverr (FVRR 4.07%) is emerging as one of the safest ways to bet on the continued use of artificial intelligence (AI). Searches from potential employers for freelancers with AI-related experience are up over 1,000% compared to six months ago.
The wildly popular chatbot, ChatGPT is a major improvement over previous generative AI applications but it still relies on human-generated content which is often flawed. In addition to searches for freelancers who can deploy and implement AI technologies, Fiverr is seeing a lot of demand for less skilled workers who can verify and edit AI-generated content.
Hardly a week's gone by this year without news of layoffs from a big tech company. Despite a difficult economic environment, the number of active buyers on Fiverr rose year over year during the first three months of 2023. Investors were also encouraged to see average first-quarter spend per buyer climb 4% year over year.
Extra demand for AI-related services could push Fiverr's bottom line much higher in the years ahead but the market's expectations are still somewhat muted. The stock is trading for just 18.9 times forward-looking earnings estimates.
2. Shockwave Medical
It isn't just your imagination, there are a lot more older adults than there used to be. Between 2010 and 2020, America's 65-and-older population skyrocketed by 38% to 56 million, which means many more people are also living with arteries hardened by calcium deposits.
Shockwave Medical (SWAV -0.02%) makes intravenous lithotripsy (IVL) devices that employ sonic pulses to break up calcium deposits. This makes the process of stretching a blocked artery with an angioplasty balloon and inserting a stent far more likely to succeed without life-threatening complications.
Shockwave is the only company on the planet that has earned FDA approval to market IVL devices and hospitals are beating a path to its door. First-quarter sales shot 72% higher year over year and earnings more than doubled.
Continued growth at its current pace would make long-term shareholders rich but investors should know there's already a lot of optimism baked into Shockwave's stock price. It's currently trading at 47 times trailing earnings so risk-averse investors should probably watch its story play out from a safe distance.
3. The Trade Desk
Buying shares of The Trade Desk (TTD 4.15%) is probably the best way to benefit from the increasing popularity of ad-supported streaming services and the proliferation of connected televisions in our living rooms. This company's independent platform allows advertisers to bid on billions of potential ad placements daily.
Unlike the giants of the digital advertising industry, Meta Platforms, and Alphabet, The Trade Desk doesn't own the ad inventory it's asking advertisers to bid on. This is a big reason why it's thriving relative to the ad industry's biggest players, First quarter sales for The Trade Desk rose 21% year over year. Over the same time frame, Alphabet's Google Ad revenue stagnated and Meta reported a 17% drop in average price per ad impression.
The connected televisions (CTV) in our living rooms represent The Trade Desk's biggest opportunity at the moment. Big brand advertisers that typically avoid internet display ads and social media placements are increasingly eager to buy targeted CTV ads.
The Trade Desk's method for tracking users while maintaining anonymity, called UID2 has already been adopted by Disney, Paramount Global, and Comcast's NBCUniversal. As a result, 75% of third-party data now includes UID2 identifiers compared to around 15% in late 2022.
I'm not the first analyst to notice a tsunami of demand for premium television placements headed in The Trade Desk's direction. The stock is currently trading at 52 times forward-looking earnings expectations. This implies sustained growth at its present rate for at least several more years.
The Trade Desk has a good chance to meet the market's lofty expectations but cautious investors should understand the stock will get crushed if there's a even hint of a slowdown over the next several years. This stock's a buy now but only for investors at the upper end of the risk tolerance spectrum.
