Prediction: 2 unstoppable stocks that will double before the market does

IInvesting in index funds can be rewarding. They typically offer exposure to a wide range of the stock market, or at least a highly diversified part of it, which makes them a solid option for most investors. However, for those willing to take on a little more risk in their investments, picking individual stocks can generate returns that far exceed the return of an index fund (with the caveat that they can also result in much greater losses).

The Nasdaq-100 The tech index is currently trading in bearish territory (down about 24.3% from its 52-week high). Many individual tech stocks are trading 50% or more off their 52-week highs. But savvy long-term investors know that times like these present opportunities to pick up quality stocks at steep discounts that have little to do with actual company performance.

Let’s take a closer look at two such companies that I think will recover and double in value from here before the Nasdaq-100 does.

Image source: Getty Images.

1. Assets received

The first step to finding high-growth opportunities is to research companies that sell in-demand products or services. Assets received (NASDAQ: UPST) is a fintech company that specializes in helping lenders determine creditworthiness. She developed an artificial intelligence algorithm that analyzes around 1,600 data points on a potential borrower. Its scoring system is much more comprehensive than Just IsaacFICO’s credit scoring system, which uses only a handful of simple measures.

Upstart’s algorithm is also fast; it can process all that data and make an instant decision about 74% of the time, whereas it would take days or weeks for a human to manually perform the same assessment. His thoroughness and speed have made him popular with several lending partners who use Upstart’s service to help determine who to lend and who to turn down.

Upstart’s share price has fallen about 88% from its all-time high, in part because the stock was caught in a broader tech sell-off. The stock price is also down because the company took on about $597 million in loan obligations last quarter instead of immediately selling those loans to its lending partners. Upstart doesn’t normally take on credit risk in its operations – it earns its income from the fees for making loans to banks – so this news has really spooked investors.

Company management said it was a temporary symptom of interest rate volatility and determining the appropriate rate for loans related to its new auto lending segment. Auto loans are a new offering and the segment is growing at an explosive rate. He now works with 35 car brands sold in 525 car dealerships and helps them manage sales and offer car loans. The number of dealers increased by 224% compared to only 162 dealers a year ago.

Upstart generated $57 million in revenue in 2017. Just five years later, the company expects to collect $1.25 billion in revenue, a jump of 2,090%. Upstart is also profitable, which is rare for a fast-growing tech company, generating $2.37 of adjusted earnings per share in 2021. The stock trades at a price/earnings multiple of 21, which is cheaper than the multiple of the Nasdaq-100 index. of 25.

The stock only needs to recoup a fraction of its pre-sale value to double from here, and given its rate of earnings growth, chances are investors have been too pessimistic. . After all, Upstart could have billions of dollars of opportunities ahead.

A person wearing a virtual reality headset.

Image source: Getty Images.

2. Metaplatforms

Metaplatforms (NASDAQ:FB), the parent company of social media brands like Facebook, Instagram and WhatsApp, is also one of the main developers of the metaverse. This new collection of virtual worlds is full of promise.

Developing the metaverse doesn’t come cheap, and Meta said its Reality Labs segment (which runs Metaverse’s metaverse efforts) spent $10 billion more than it took in 2021, which doesn’t. did not please investors. The loss is partly responsible for the fact that Meta stock has lost about 51% of its value since September. In tough economic times, investors value prudent cash management, not cash burn. Reality Labs lost another $2.9 billion in Q1 2022, suggesting its full-year metaverse costs could easily top the 2021 tally.

What investors need to consider is that these metaverse investments should pay off in the long run and set the company up for what will ultimately be a big market opportunity. Some analysts calculate that the metaverse market could be worth $800 billion a year by 2024. More ambitious projections call for a market of $30 trillion over the next decade. The two numbers dwarf Meta’s investment in the project so far.

Meta has a track record of consistent revenue growth and overall earnings since entering the public markets in 2012. In 2021, Meta generated $117.9 billion in sales and $13.77 in earnings per share, placing the stock at a price to earnings ratio of just 14. This implies that Meta stock will need to rise 80% just to trade in line with its tech peers.

Analysts expect Meta could see a drop in earnings to $11.88 per share in 2022, which is partly due to expected cash burn in Reality Labs and also because the company is still struggling. with ApplePrivacy changes on its devices. Apple has made it easy for social media users to opt out of tracking their usage and interests. This makes it much harder for apps like Facebook and Instagram to direct targeted ads to the right users (for which advertisers pay a premium). Meta management said it expects the changes could cost the company $10 billion in lost revenue in 2022.

Still, growth is expected to rebound in 2023 and there is a reasonable chance that Meta’s stock market multiple will narrow its gap with the Nasdaq-100. With the value of Metaverse set to skyrocket in the coming years, Meta could see a significant rise in its stock price, assuming it can monetize its ongoing investment.

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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Antoine Di Pizio has no position in the stocks mentioned. The Motley Fool has positions and recommends Apple, Meta Platforms, Inc. and Upstart Holdings, Inc. The Motley Fool recommends Fair Isaac and recommends the following options: $120 long calls in March 2023 on Apple and $130 short calls in March 2023 on Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.