Most Americans saved far less than $1 million to live out the rest of their days. According to the Federal Reserve Board, Americans between 45 and 54 have only saved a median of $115,000 for retirement, while those between 55 and 64 have only socked away a median of $185,000 in their retirement accounts.
If you belong in one of those two categories, you should consider buying and holding a few promising growth stocks to cross the million-dollar mark. If you have $150,000 to invest, you would need to grow your investment at a compound annual growth rate (CAGR) of 21% over the next 10 years to join the two comma club.
Image source: Getty Images.
That might seem like a high bar to clear, but I believe these three stocks fit the bill: Super Micro Computer (SMCI 8.89%), Cloudflare (NET 1.44%), and The Trade Desk (TTD 1.67%). But instead of investing $150,000 in just one of those stocks, investors should consider investing $50,000 in each one -- and sit on them for another 10 years.
1. Super Micro Computer
Super Micro Computer, more commonly known as Supermicro, is one of the world's largest producer of servers. It specializes in high-performance servers, and its longtime partnership with Nvidia grants it early access to the chipmaker's top-tier data center GPUs for AI applications. It's also rolling out more AI servers powered by Advanced Micro Devices' newest data center GPUs.
The explosive growth of the AI market, along with Supermicro's market share gains in AI servers against its larger competitors, enabled it to grow its revenue at a compound annual growth rate (CAGR) of 29% from fiscal 2020 to fiscal 2023, which ended last June. From fiscal 2023 to fiscal 2026, analysts expect its revenue to rise at an even higher CAGR of 42% as the AI market continues to expand. Analysts expect its EPS to grow at a CAGR of 36% during the next three years.
Supermicro's stock soared 2,540% over the past three years, and it was recently added to the S&P 500. But despite those gains, its stock still looks reasonably valued at 35 times next year's earnings -- and it could easily grow at a CAGR of more than 21% over the next decade as the nascent AI market blossoms.
2. Cloudflare
Cloudflare's content delivery network accelerates the delivery of digital content for websites and insulates them from bot-based attacks. It accomplishes that by storing cached copies of the digital media on "edge" servers located closer to a website's visitor than the original servers. It claims this approach will eventually make it a "water filtration" system for the modern internet -- screening and removing attacks before they become damaging -- as websites become more media-intensive.
Cloudflare went public in 2019, and its revenue grew at a CAGR of 46% from 2019 to 2023. It currently serves data from 310 cities in over 120 countries, and it processes about 55 million HTTP requests every second. It's growth faced a slowdown over the past year as the macro headwinds drove companies to rein in their spending, but analysts still expect its revenue to rise at a CAGR of 28% from 2023 to 2026. That's why its stock has risen nearly 570% since its IPO.
Cloudflare isn't yet profitable on the basis of generally accepted accounting principles (GAAP), but its non-GAAP profits have risen significantly since its IPO. Its stock might seem pricey right now at 20 times this year's sales, but it could maintain that premium valuation if it continues growing its revenue at a CAGR of at least 20% over the next decade.
3. The Trade Desk
The Trade Desk is the world's largest independent demand-side platform for purchasing ad space across desktop, mobile, and connected TV platforms. It encourages companies to purchase ad space across the "open internet," which isn't locked into the "walled gardens" of Alphabet's Google or Meta Platforms' social media apps.
From 2019 to 2023, The Trade Desk's revenue grew at a CAGR of 31%. Its growth notably slowed down in a tough macro environment over the past year, but analysts still expect its revenue to rise at a CAGR of 22% from 2023 to 2026 as it expands its market share and profits from the expansion of the ad-supported streaming video market. Its EPS is expected to grow at a CAGR of 59% over the next three years.
The Trade Desk's stock's has risen 330% over the past five years and isn't cheap at 131 times forward earnings and 17 times this year's sales. But it could justify those higher valuations if it continues to carve out a growing niche in the advertising market which is well-insulated from Alphabet and Meta. The rollout of more AI tools across its Solimar platform, which collects more first-party data from companies for ad placements, could also make it a great AI play.
