When Wall Street worries about the economy and the market keeps falling, focusing on the fastest growing companies can help you uncover the best stocks. If a business can generate revenue growth of over 50% when the economic outlook is weakest, it must be delivering something very important to customers.
StoneCo (STNE 2.82%), Fubo TV (FUBO -1.53%)and Snowflake (SNOW 2.87%) are three companies that continue to show strong revenue growth in 2022. I personally own shares of StoneCo and Snowflake. Here’s why these stocks could produce monster returns over many years.
StoneCo is a Brazil-based fintech company that has seen rapid growth over the past year, and the stock has already earned a place in Warren Buffett’s portfolio at Berkshire Hathaway. It provides payment solutions, digital banking, credit and insurance products, and point-of-sale software to merchants in one of the fastest growing e-commerce regions in the world.
Revenue excluding the impact of acquisitions increased 87% year-over-year in the first quarter, compared to 51% in the fourth quarter. The company’s momentum is driven by growing consumer and merchant demand for digital payment solutions. Management sees a huge opportunity for expansion, considering that software penetration in Brazil is still low compared to North America.
Part of StoneCo’s recent revenue acceleration was management’s new pricing policy to increase the fees charged for transactions. Despite these higher fees, total merchant payment volume still grew 93% year-over-year, a slight acceleration from the 87% growth in the prior quarter. This suggests that StoneCo offers a compelling value proposition to customers with enormous pricing power built into its business.
Revenue is expected to climb between 148% and 154% year-over-year in the second quarter. Investors should seize this opportunity as the stock trades at a cheap price-earnings ratio of 31.
2. Fubo TV
Fubo has benefited from the cord-cutting as people seek alternatives to expensive cable subscriptions. Fubo is gaining subscribers in droves for its sports-focused menu, but Fubo also has a compelling range of local news and entertainment channels to complement its offering.
The company’s revenue growth has been outstanding, with first-quarter revenue doubling year-over-year while subscriber numbers increased 81%. Both metrics have consistently been above 100% in recent quarters.
Fubo’s growth trajectory is starting to make the stock’s recent slump a great buying opportunity.
The stock is down 91% from a year ago, putting FuboTV’s market capitalization (outstanding shares times stock price) at just $483 million. Investors are worried about the sustainability of those strong revenue numbers, not to mention the company’s bottom line losses in a competitive live TV streaming market.
However, no other streaming platform offers the breadth of sports programming with Fubo’s built-in sports betting feature. So far, the company has been licensed to offer sports betting in a limited number of states, but Fubo is positioning itself to take advantage of the growing demand sweeping the United States.
With just over a million paying subscribers, FuboTV has tens of millions of households to appeal to. If you have a high risk tolerance, Fubo offers more than enough benefits to compensate.
One area of the economy that holds up well in 2022 is cloud services. No matter how grim the short-term economic picture is, businesses need to invest in migrating to the cloud to stay competitive.
Snowflake offers a single platform for businesses to derive meaningful business insights from their data. Snowflake’s Data Cloud Platform integrates with other cloud service providers, such as Amazon and Microsoftand Snowflake only charges businesses for the resources they use, helping them save money.
Snowflake has consistently doubled its revenue year over year in recent quarters. It posted 84% growth in the first fiscal quarter ending in April. It also reported a net revenue retention rate of 174%, meaning customers continue to spend on more services the longer they stay.
The ability for businesses to share data on the platform is a key competitive advantage for Snowflake. The more customers that join the platform, the more data that can be exchanged, which encourages companies to stay loyal to Snowflake for the long term.
The move from on-premises servers to the cloud will take many years to materialize and will undoubtedly create considerable wealth for investors who own the right cloud stocks. Snowflake estimates its addressable market at $248 billion, which is huge compared to its annual revenue of $1.4 billion. Due to its steady growth and recent share price decline, I recently added Snowflake to my personal holdings.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. John Ballard holds positions at Amazon, Snowflake Inc. and Stoneco LTD. The Motley Fool has positions and recommends Amazon, Berkshire Hathaway (B shares), Microsoft, Snowflake Inc., Stoneco LTD, and fuboTV, Inc. The Motley Fool recommends the following options: Long January 2023 $200 Calls on Berkshire Hathaway ( B shares), short $200 put options in January 2023 on Berkshire Hathaway (B shares) and short $265 call options in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.