If you have $3,000 that you are trying to double to $6,000, you have clicked on the right article. The feat will probably take a few years or more, but it is certainly achievable in the stock market. To help you achieve this goal, I’ve selected three growth stocks that could increase in value enough over the next five years to double your initial investment.
Chegg (CHGG -3.17%) is an education technology company serving students worldwide. Airbnb (ABNB -0.14%) is an international travel facilitator. And DraftKings (DKNG -4.45%) provides mobile gaming services. Let’s look at why each could make a lucrative investment.
Chegg
Chegg is a popular service among students. It operates a subscription business whereby students pay $15-20 per month to access its 84 million exclusive content, mostly step-by-step solutions to concepts students need to learn throughout their college programs. If Chegg doesn’t have information about the concept its members are investigating, those members can ask Chegg’s subject matter experts up to 20 questions per month to get the answers they need.
Operating result CHGG (annual) given by Y-Charts.
Chegg increased its revenue from $255 million in 2017 to $776 million in 2021. Additionally, the business model evolves efficiently, and its operating profit went from a loss of $23 million to a profit of $78 million during the same period. Stock prices generally react to earnings. If earnings triple again in the next five years, Chegg’s share price could react in the same way.
Airbnb
Airbnb’s business has been devastated by the pandemic; revenue fell 30% in 2020 to $3.4 billion. Since then, revenues have soared as consumers take vacations they delayed during the early stages of the outbreak. In 2021, Airbnb sales grew 77% to $6 billion.
Additionally, Airbnb’s unique business model is proving effective in the eyes of customers. The Company does not own the properties on the Platform. Instead, it encourages hosts to list extra bedrooms, garages, vacation homes, and even treehouses for rent on Airbnb.com. This gives consumers a more comprehensive selection when they are ready to book travel. Compare that to traditional hotels and resorts, which offer rooms with little difference. Airbnb’s unique selections could propel its growth well beyond the time consumers unleash all of their pent-up post-pandemic travel demand.
Global hospitality and travel spending is expected to reach $1.1 trillion in 2022. Beyond that, the industry would still be $400 billion below pre-outbreak levels. Meanwhile, Airbnb’s $6 billion in revenue in 2021 was already ahead of the $4.8 billion it earned in 2019. Airbnb’s growth ahead of the industry suggests that it is gaining market share. This means that as travel spending continues to rebound, Airbnb could rebound even higher.
DraftKings
DraftKings is taking advantage of the increasing legalization of online gambling in the United States. The company now offers mobile sports betting in 17 states and mobile casino-like gaming in 5 states. For consumers, this adds convenience, as most people live hours away from the nearest physical casino. DraftKings allows people to go from an impulse to a bet in seconds.
Widening access and customer demand have increased revenue from DraftKings from $192 million in 2017 to $1.3 billion in 2021. With many more states remaining, DraftKings could sustain this robust growth for several years. The company has made excellent progress in expansion so far, with plans for new markets in the short term. California’s secretary of state has confirmed that the DraftKings-backed sports betting initiative has reached the threshold to qualify for the November 2022 ballot and its management has expressed optimism about the outcome.
Updated valuations
PS DKNG report given by Y-Charts.
Luckily for investors looking to double their money, these three excellent actions mentioned above are selling at discounted valuations, offering promising deals to potential investors. Looking at a business price/sales ratio is a way of determining a company’s valuation and is calculated by dividing the market capitalization of the company by its turnover for the last 12 months. Simply put, a smaller P/S ratio generally indicates a reduced valuation and, therefore, a good deal. As shown in the chart above, Chegg, Airbnb and DraftKings are all trading at historically low P/S ratios.
But all of these titles have prospects for improvement that could help boost their earnings. So, investors who invest $3,000 in these three stocks today could have forces working in their favor to double their wealth over the next five years.
Parkev Tatevosian holds positions at Airbnb, Inc. and Chegg. The Motley Fool has posts and recommends Airbnb, Inc. The Motley Fool recommends Chegg. The Motley Fool has a disclosure policy.
Comments are closed.