As an investor, are you able to remain patient to achieve above-average growth? That's often what it takes. It's not terribly difficult to spot a company with tremendous potential. It's just not always clear when the market might finally start rewarding that company's success.
These three stocks haven't been great performers of late, but each could begin a long-term rally with just a nudge from the broader market.
PayPal Holdings
There was a time not too long ago when PayPal Holdings (PYPL 2.90%) was the name to beat in the digital payment market -- and the stock's performance reflected that.
As could have been expected though, competition finally started creeping in. Not only is the stock now down 80% from the pandemic-bolstered peak it touched in 2021, but the shares are back to their 2017 levels. The stock's also gone nowhere for nearly a year now. It just still seems like there are too many competitive threats.
That line of thinking, however, ignores a couple of important details about PayPal.
One of these details is that even with all the alternative payment platforms that have appeared, PayPal is still the dominant player in the business. Data compiled by Statista suggests PayPal accounts for nearly half of the worldwide web's payment processing activity (when including payment gateway activity), while numbers from Cornerstone Advisors confirm PayPal remains the single-most-used P2P (peer-to-peer) digital payment service, particularly among the all-important 21- to 42-year-old demographic. That matters, because once consumers become comfortable with a brand, they tend to stick with it.
There are some dents and bruises here, to be sure. For instance, the number of active PayPal users slipped 2% to 423 million in the final quarter of 2023, extending a contraction that first took hold at the beginning of last year.
Just keep things in perspective, though, those periods are being compared to a time when many people were still taking precautions to reduce their potential to be exposed to the coronavirus, and were not quite as willing to shop in person as they are now. Also, while the total number of active PayPal accounts ebbed a bit last year, total payment volumes actually increased 13% last quarter and 12% last year. That's a more important number to PayPal shareholders. Even more important than that, analysts are calling for top-line growth this year as well as next year as the company continues to improve overall engagement.
Rocket Lab USA
Rocket Lab USA (RKLB 3.29%) isn't exactly a household name. There's a good chance, however, that you or someone in your household has benefited indirectly from its service.
Simply put, Rocket Lab gets things into space. While putting satellites into orbit was once largely the purview of NASA and other government-run agencies, a growing number of privately run organizations are now handling the task. Rocket Lab USA is one of these entities. To date, it has launched 177 satellites, and is currently sitting on a backlog of more than 40 more. Expect that backlog to grow. Analysts are modeling for revenue growth of nearly 80% for this year, and another 44% growth for 2025.
It's still just the beginning, though.
See, for all the effort that's been made on the satellite front so far, we've only scratched the surface of this tech's potential. Aircraft navigation, enterprise-level broadband connectivity, the reduction of carbon emissions, the creation of new pharmaceuticals, and stronger defense systems are all on the radar now that launches are more affordable and feasible. That's why Straits Research believes the satellite communications market will grow from 2021's total of nearly $72 billion to more than $160 billion by 2030. Rocket Lab stands ready to capture at least its fair share of this growth.
This might help bolster the bullish case for the stock: Analysts' current consensus price target stands at $8 per share -- about 75% above the current price. Most analysts keeping tabs on Rocket Lab USA also consider the stock a buy, if not a strong buy.
SoFi Technologies
Fintech company SoFi Technologies (SOFI 3.69%) has its roots in the student loan consolidation business, but it has become so much more. It has added checking accounts, credit cards, mortgage loans, insurance, and investing services, giving it a suite of services similar to those offered by most traditional banks. The key difference between SoFi Technologies and most of its peers, however, is that its operation is 100% online. There are no physical branches.
There was a time when consumers might have been leery about using such a bank. Even though most customers rarely (if ever) visit a brick-and-mortar branch these days, they still like knowing an in-person interaction is an option.
But that era is coming to a close. The American Bankers Association reports that last year, 71% of U.S. consumers surveyed said they preferred to bank online -- or through an app -- while only 9% preferred to handle banking business at a branch. And the younger they are, the more likely they are to embrace digital options. Numbers compiled by Chase Bank say 98% of millennials and 99% of the Gen Z crowd regularly use mobile banking apps for a variety of reasons.
These younger generations' children will, of course, be even more digitally native, leaving them even less interested in in-person banking. Once consumers develop a habit based on convenience, it tends to stick.
As of the end of 2023, SoFi had 7.5 million customers, up 44% year over year, and more than twice as many as it had at the end of 2021.
To be sure, traditional brick-and-mortar banks are expanding their digital offerings. None of them, however, were built from the ground up to be an online bank as SoFi Technologies was. Its growth shows this.
