15 Mar 3 Growth Stocks That Could Deliver Huge Gains
The pandemic has brought about a sea change in our habits and routines.
But change should not always be perceived as a bad thing.
In many ways, the alterations to human practices were the result of the acceleration of trends that were already present.
The crisis has either magnified them or fast-tracked their progress.
As investors, we should take note of these changes and position our portfolios accordingly.
Although it can be argued that some of these practices may revert to pre-pandemic days when the crisis has passed, many of the new habits should be ingrained by then.
It is these enduring trends that will define the future of how we work, play, socialise and interact with one another.
Here are three companies that are latching on to these tailwinds to grow their business.
All three have the potential to deliver massive gains to investors over the long-term should these trends persist.
Etsy (NASDAQ: ETSY)
Etsy is an e-commerce company that runs a platform for the buying and selling of unique and creative items.
If you are searching for a personalised, hand-made gift for your loved ones, Etsy is the place to head to.
Due to numerous lockdowns and movement restrictions, many people were forced to shop online for gifts and essential items.
This surge in e-commerce adoption has benefitted Etsy as its active buyer base has jumped from 46 million in 2019 to 81 million in 2020.
New users make up almost 47% of Etsy’s current user base and have more than doubled from 2019’s level, demonstrating the significant rise in the number of people using the company’s platform.
Active sellers also rose in tandem by 64% year on year, going from 2.5 million in 2019 to 4.1 million last year.
As a result of this increase in buyers and sellers, gross merchandise sales jumped by 106.7% year on year for 2020 to US$10.3 billion.
Etsy’s full-year revenue soared by 111% year on year to US$1.7 billion, while net profit more than tripled year on year to US$349.2 million.
The company’s “Right to Win” strategy, focusing on the importance of human connections and easy search and discovery, should set the tone for Etsy’s long-term growth.
More people are now shopping online than ever before, and this trend looks set to continue even after the crisis has abated.
Peloton (NASDAQ: PTON)
Peloton is a company that sells exercise bikes for use in homes. It also conducts exercise workout sessions by selling connected fitness subscriptions to customers.
The pandemic has been a boon to the company as demand for its products has soared due to greater numbers of people telecommuting.
Lockdowns have also pushed people to exercise at home to keep fit.
For its fiscal 2021 second quarter, Peloton saw its connected fitness subscriptions surge 134% year on year to 1.7 million, while paid digital subscriptions grew 472% year on year to around 625,000.
The company’s member base more than doubled from two million in the second quarter of fiscal 2020 to 4.4 million for its most recent quarter.
Total workouts quadrupled from 24.3 million to 98.1 million for the three months ended 31 December 2020.
For the half-year ended 31 December 2020, Peloton saw total revenue more than double from US$694.3 million to US$1.8 billion.
Of note, subscription revenue jumped sharply from US$144.3 million to US$351.2 million.
The company reported a net profit of US$133 million for the half-year, reversing a loss of US$105 million in the prior period.
The company looks set to grow with its recent acquisition of Precor, a commercial fitness equipment provider. Peloton is also expanding into Australia, one of the first Asian countries it is targeting for growth.
Fiverr (NYSE: FVRR)
The pandemic has also pushed a new mode of working into the limelight.
There are now significantly more people working in freelance roles than before, aided by technology and connectivity.
And Fiverr, a company that hosts a platform connecting freelancers and buyers, is a direct beneficiary of this trend.
The company saw active buyers on its platform jumped 45% year on year to 3.4 million.
Revenue for the full year surged by 77% year on year to US$189.5 million.
Despite the stronger top-line growth, Fiverr recorded a net loss of US$14.8 million, less than half of the loss of US$34.2 million it incurred in 2019.
The path to profitability may not be far off, though.
Fiverr has guided for a 46% to 50% year on year revenue growth for 2021.
It also recently announced a new feature known as “Subscriptions” that forges long-term relationships between freelancers and customers.
This move represents a significant step for the company as its platform is now more attractive to potential freelancers who seek a more dependable source of income.
Fiverr also acquired a creative talent platform called Working Not Working that offers high-end talent, allowing it to host more upmarket customers and attracting freelancers with niche skills.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.