Rising interest rates crushed many meme stocks, cryptocurrencies, and other speculative investments over the past two years. Some nimble traders made some quick profits, but many other investors racked up steep losses as the market crashed.
That boom-and-bust cycle highlights the importance of investing in healthy companies that are reasonably valued. These three tech stocks -- Uber Technologies (UBER -0.38%), Coupang (CPNG -0.52%), and Oracle (ORCL 2.02%) -- check all the right boxes and could turn a modest investment -- even something on the level of $3,000 -- into a small fortune over the next few decades.
Image source: Getty Images.
1. Uber
Uber went public more than four years ago, but it still hovers around its initial public offering (IPO) price of $45 a share. The mobility and delivery services leader failed to impress the market even as it generated stable bookings growth, raised its take rates, and expanded its margins.
Uber's gross bookings dipped 11% in 2020 as the pandemic disrupted the growth of its mobility business. The growth of Uber Eats throughout the crisis partly cushioned that blow. As the pandemic ended, Uber's gross bookings grew 56% in 2021 and 83% in 2022.
The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also turned positive in 2022 as it reined in spending, cut thousands of jobs, and divested several of its lower-margin overseas units and its self-driving vehicle division. It also finally turned profitable on a generally accepted accounting principles (GAAP) basis for the first time in the second quarter of 2023.
All of those improvements suggest Uber's scale gives it plenty of staying power in the competitive mobility, food delivery, and freight delivery markets. However, its growth in active consumers, total trips, and gross bookings all cooled off over the past year as it lapped its post-pandemic recovery and faced tougher macroeconomic headwinds.
Nevertheless, analysts still expect Uber's revenue and adjusted EBITDA to rise 18% and 123%, respectively, this year. Those are impressive growth rates for a stock that trades at 2.5x this year's sales and 25x its adjusted EBITDA -- so it might be a great stock to accumulate at its IPO price as the bulls look the other way.
2. Coupang
Coupang, the top e-commerce company in South Korea, went public in March 2021. But today, it trades more than 50% below its IPO price of $35.
Like many other e-commerce companies, it lost luster as growth cooled off in a post-pandemic market. Its steep losses also made it an unappealing play in a high-interest-rate environment.
Coupang's revenue rose 54% in 2021 but grew just 12% in 2022. However, its year-over-year growth in active customers and total revenue accelerated in the first two quarters of 2023. The company's gross and adjusted EBITDA margins also continued to expand, and it actually turned profitable on a GAAP basis over the past four quarters.
It attributed that expansion to the growth of its higher-margin third-party marketplace and higher spending from all of its customers. Coupang's margins rose even as it crept into the Taiwanese market and upgraded its logistics and fulfillment networks. Analysts expect its revenue and adjusted EBITDA to grow 16% and 627%, respectively, for the full year.
Those growth rates are impressive, yet Coupang's stock trades at just 1.2x this year's sales and 32x adjusted EBITDA. I wouldn't be surprised if this stock bounces back to its IPO price and keeps rising over the next few years.
3. Oracle
Oracle, the world's largest database software company, was once considered a slow-growth tech play that was mainly owned for stability instead of growth. Yet over the past five years, Oracle's stock has delivered a total return of nearly 140% as it bought back nearly a quarter of its own shares. That growth spurt was driven by the transformation of its on-site applications into cloud-based services, which complemented the growth of its own cloud infrastructure platform and enterprise resource management (ERP) services, and the repatriation of its overseas cash.
Oracle's revenue grew 5% in fiscal 2022 (which ended in May 2022) and 7% on an organic basis (excluding its acquisition of the healthcare IT giant Cerner) in fiscal 2023. It expects to face a mild slowdown in the first half of fiscal 2024 as the macro headwinds drive more companies to rein in their cloud-based spending, but analysts still expect its revenue and adjusted earnings per share (EPS) to both grow by about 8% for the full year.
Based on those expectations, Oracle's stock looks reasonably valued at 19x forward earnings and less than 7x this year's sales. It also pays a decent forward dividend yield of 1.5% and plans to keep plowing most of its free cash flow (FCF) into its ongoing buybacks. Oracle's near-term growth might be throttled by macro headwinds, but it's still a great play on the cloud market and a solid addition to any long-term portfolio.
