2 growth stocks that could make you a millionaire


There are many factors that influence a company’s future prospects, but one of the most important is sales growth. Specifically, strong revenue momentum is often an indicator of a valuable product or service, and companies that create that value for customers have the potential to generate life-changing returns. who own their shares.

Etsy (NASDAQ: ETSY) and Pinterest (NYSE: PINS) have seen phenomenal growth in recent years, but both have plenty of room to function. Here’s why these actions could make you a millionaire.

Image source: Getty Images.

1. Etsy

Etsy’s mission is to keep commerce human. Its global marketplace connects creative sellers with buyers looking for artisanal or specialty products, the kinds of things they can’t find anywhere else. Notably, this strategy has differentiated Etsy from its competitors, allowing the company to compete with e-commerce titans like Amazon.

Last year, the pandemic accelerated Etsy’s growth, and it has become a household name for many consumers, especially those in need of face masks. In fact, Etsy generated $ 10.3 billion in gross merchandise sales (GMS) in 2020, up 107% from the previous year, and it is now the fourth largest e-commerce market in the United States. United States.

This scale is a huge plus, turning the wheel that powers Etsy’s business. Here’s how it works: As more consumers buy from Etsy, sellers benefit from a wider range of potential buyers; and as more sellers list items on Etsy, buyers benefit from a greater selection of products.

Over time, this virtuous circle serves to expand Etsy’s ecosystem, diversifying its inventory and further differentiating it from big box retailers. This, in turn, translated into strong revenue growth.

Metric

Q1 2018 (TTM)

Q1 2021 (TTM)

TCCA

Active buyers

2.0 million

4.7 million

33%

Active sellers

34.7 million

90.7 million

38%

Returned

$ 465.3 million

$ 2.0 billion

64%

Data source: Etsy SEC repositories, Ycharts. TTM = 12 rolling months. CAGR = compound annual growth rate.

Despite these impressive measures, Etsy has only scratched the surface of its potential. In fact, management estimates its total addressable market (TAM) at $ 437 billion by 2023, but that number jumps to $ 2,000 billion if you include offline sales in relevant retail categories. In other words, Etsy’s TAM is expected to continue to grow as e-commerce gains traction.

Additionally, management’s estimate only takes into account six markets globally, meaning geographic expansion could drive Etsy’s TAM even higher. To this end, the company recently entered India, the world’s fastest growing e-commerce market.

Here’s the big picture: Etsy’s sales represent less than 1% of its addressable market. But if the business can continue to scale by bringing in new buyers and sellers, I think Etsy could increase its current market cap by $ 24 billion tenfold.

2. Pinterest

Pinterest is the go-to place for inspiration. It combines user-curated media content with a visual search engine, helping people imagine their dreams and discover new ideas, like a tasty recipe, trendy summer fashions, or tips for planning a tropical getaway.

In particular, the platform is based on artificial intelligence and computer vision, allowing Pinterest to personalize the experience for each user. And as more users engage, Pinterest collects more data, refining its predictive capabilities.

Two people looking at a smartphone screen.

Image source: Getty Images.

Collectively, these attributes make Pinterest unique – it’s not just a search engine, nor just a social platform. Pinterest is a tool that helps people find what they want, even if they don’t have the words to describe it.

These qualities also make it a great place for brands to reach consumers. Because people come to Pinterest looking for inspiration, digital ads integrate organically into the platform, enriching the experience. In fact, ads on Pinterest deliver twice the return on investment (ROI) compared to other social media. And advertisers have started to take notice, increasing their spend on the Pinterest platform.

This translated into strong revenue growth.

Metric

Q1 2018 (TTM)

Q1 2021 (TTM)

TCCA

Monthly active users

239 million

478 million

26%

Returned

$ 521.0 million

$ 1.9 billion

54%

Data source: Pinterest SEC documents. TTM = 12 rolling months. CAGR = compound annual growth.

So why does Pinterest have so much potential? With a market cap of $ 46 billion, Pinterest is more than 20 times smaller than Facebook, yet its unique platform is a better place for brands to reach consumers.

Specifically, people come to Pinterest looking for ideas – in other words, they often come with an intention to buy. As a result, over the past year, Pinterest has seen a 200% increase in the number of users interacting with shopping tools on its platform. Additionally, the company has focused on creating a positive and safe environment for the brand, which means ads are unlikely to appear alongside divisive content or hate speech. Other social platforms cannot make the same claims.

If Pinterest can continue to grow the number of monthly active users at a steady rate, the platform should become more and more valuable to advertisers over time. And with the digital advertising market set to hit $ 645 billion by 2024, I think Pinterest could increase tenfold in the years to come. That’s why investors should consider adding this growth value to their portfolios.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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