New investors may not see $ 2,000 as a huge investment portfolio. However, venture capital firms and PayPal funds Co-founder Peter Thiel’s $ 2,000 investment in PayPal in 1999 in a Roth IRA left him with a multibillion-dollar stake in his tax-free retirement account, according to ProPublica.
Granted, few investors are likely to co-found a company, buy the shares, and turn $ 2,000 into billions of dollars. However, growth stocks like Latch (NASDAQ: LTCH), OppFi (NYSE: OPFI), and Pinterest (NYSE: PINS) hold enormous potential to provide small investors with massive returns.
Latch is redefining building security with Software as a Service (SaaS). It combines software, devices and services into a “full operating system” that offers a new approach to building security for owners, residents, couriers and visitors. Through its subscription-based system, people can access a specified building or area via smartphone, card or code.
The company serves apartments, commercial office space and real estate related to life sciences. More than 3 in 10 new apartment buildings in the United States have contracted with Latch, although only 1 in 10 of these new apartment buildings are currently using the system. This means that once the buildings are operational, subscription revenues are expected to increase.
Income has already started to increase rapidly. For the first nine months of 2021, Latch reported revenues of $ 27 million, an increase of 154% over the same period in 2020. Nonetheless, with the cost of income and expenses each increasing a little more. of 100% during this period, the net was a loss of $ 112 million, according to generally accepted accounting principles (GAAP). These results from the first three quarters of 2021 mean losses are up 140% from the first nine months of 2020.
However, total bookings for the third quarter alone amounted to $ 96 million. Additionally, cumulative bookings have grown 700% over the past two years, indicating massive increases in revenue are expected to continue once the new facilities open and bookings turn into subscription revenue.
Despite these increases, the stock has fallen more than 20% from the June initial public offering. The delay of up to 24 months between bookings and when device and subscription revenue begins to pile up may have frustrated some investors. Plus, the price-to-sales (P / S) ratio of 37 seems to price this company perfectly. With massive growth in bookings pointing to a bright future, Latch could become a winner in the long run.
OppFi provides credit to the roughly 60 million Americans who do not have access to credit services, using artificial intelligence (AI) rather than traditional credit scores to determine its ability to pay. contrary to Holdings reached (NASDAQ: UPST), another AI-focused lender, OppFi targets the subprime market, competing directly with payday lenders.
OppFi offers securitized loans through SalaryTap, which takes payments from a paycheck and charges an annual percentage rate (APR) of between 24.9% and 29.9%. Although its standard loan product has an APR of 160%. Although it may sound outrageous, it is lower than that of payday lenders. OppFi also fully discloses its fees and offers resources to help customers improve their finances, which likely leads to its Net Promoter Score of 85, a high level of customer satisfaction that compares well to Upstart.
The company’s revenue of $ 255 million in the first nine months of 2021 increased 28% compared to the same period in 2020. During the same period, it achieved adjusted net profit of $ 54 million, 60% more than its profit in the first nine months of 2020.
Even with these results, shares have fallen almost 40% since OppFi’s IPO on July 21 via a special purpose acquisition company. Nonetheless, the company projects between $ 62 million and $ 66 million in adjusted net income in 2021. That would put its 2021 P / E ratio at around 11, which seems to make this stock an underrated windfall.
As users return to more offline activities, Pinterest seems to have struggled. The third quarter 2021 monthly active user base (MAU) of 444 million was down 7% from the first quarter’s MAU 478 million. In view of these numbers, some investors may see the decline in user growth as a red flag for Pinterest.
Other than this news, Pinterest’s unique value proposition remains intact. Instead of relying on demographic profiles like websites Meta-platforms, Pinterest focuses on stimulating the imagination to reach users as individuals. By seeing what a user pins, the business can place Promoted Pins that help pinners find what they want while connecting businesses to unique audiences that other sites might ignore.
Even with the disappointing MAU numbers, revenue for the first nine months of 2021 was just over $ 1.7 billion, up 75% from the same period in 2020. Pinterest did so despite the decline in MAUs, as the average revenue per user (ARPU) came to $ 1.41 in the third quarter, up 44% from 12 months ago. Additionally, the company reported a US ARPU of $ 5.55 versus $ 0.38 internationally. Considering that only around 20% of its users are in the United States, this indicates huge potential for growth in ARPU.
In addition, the business is now profitable. In the first three quarters of 2021, Pinterest reported a net profit of $ 142 million compared to a loss of $ 336 million during the same period in 2020. Limiting spending growth to just 19% helped Pinterest to make a profit.
Regardless of the bright spots, investors have depreciated on the stock as it has fallen about 45% since its February peak mainly due to the MAU’s slow growth. Still, Pinterest now only sells 13 times the sales, up from more than 30 at the start of the year. With a lower multiple and strong ARPU growth, the stock price could potentially rise even if the MAU numbers do not.
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 heterogeneous! 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.