Investing in growth stocks has become more common among investors in recent years thanks to its potential to provide significant capital appreciation.
These companies are typically in the earlier stages of their growth trajectory and could expand their revenue and earnings at an above-average rate compared to the broader market. As revenue and earnings grow, these stocks will naturally become more valuable over time.
Here are two stocks that growth investors should have on their radar.
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Shopify
Shopify (SHOP 1.11%) is a classic example of a growth stock.
Founded in 2006, the Canadian software-as-a-service (SaaS) company provides a platform for businesses to set up and manage their online stores. It offers a wide range of tools and services to help entrepreneurs and businesses create and run their commerce operations, both online and offline.
Business owners (small and large) can accept payments through Shopify payment and Shopify POS, interact with customers through Shop App, and fund their working capital needs via Shopify Capital. The idea is that businesses can leave all the nitty-gritty details to Shopify and focus on delighting their customers.
Entrepreneurs love that approach, which explains Shopify's meteoric rise to become a dominant player in the e-commerce sector. Since its IPO in 2015, revenue grew from $205 million to $5.6 billion -- more than a 27-fold increase. Shopify's stock price followed suit, up 2,100%.
Shopify's rapid growth puts it in league with some of the biggest e-commerce companies in the world. Yet there are good reasons to expect the company to grow for many years. It can continue to increase its market share in the U.S., expand in overseas markets, and raise its take rate.
To give you a sense of the size of the prize, Shopify's retail market share remains low in the U.S. (less than 2 On top of that, the global retail market reached $27 trillion in 2022, almost four times the $7 trillion retail market in the U.S.
In short, Shopify's growth prospects will remain bright for years, and its stock deserves a spot on all growth investors' watch lists.
The Trade Desk
Like Shopify, The Trade Desk (TTD 1.67%) is another remarkable growth stock.
For those new to the company, The Trade Desk specializes in digital advertising and programmatic advertising solutions. Programmatic advertising involves using technology and data to automate the buying and placement of digital advertisements in real time, aiming to deliver more targeted and effective advertising campaigns.
By using The Trade Desk's digital platform, agencies and major advertisers can better target their prospects, ensuring their ads reach the most relevant customer cohort. Advertisers can also leverage data and real-time bidding to optimize their ad spending and make accurate decisions. The result is more flexibility, better outcomes, and lower advertising costs.
As customers become more successful in their advertising campaigns, The Trade Desk becomes more financially successful. Between 2015 and 2022, revenue grew more than 15-fold from $114 million to $1.6 billion.
But despite its past successes, the company is positioned to sustain its performance in the coming years as it surfs the digital advertising trend. To put the opportunity into perspective, global ad spending is estimated at $830 billion in 2023. Comparatively, advertisers spent around $8 billion in 2022 on The Trade Desk's platform, just a drop in the ocean. Connected TV, global expansion, and shopper marketing are critical areas of development for the tech company.
With so much going on for The Trade Desk, it is a growth stock that investors should not miss out on.
