Investing for the Future: Two Growth Stocks to Consider
Long-term wealth building doesn’t depend on constantly buying and selling popular tech stocks. By adopting Warren Buffett’s strategy of investing in quality companies at fair prices, investors can achieve lasting success.
Many investors compare their performance to the S&P 500 (SNPINDEX: ^GSPC), which has historically seen annual returns of about 10%. However, a carefully selected group of growth stocks could outperform this benchmark. Here, we highlight two growth stocks with strong potential over the next five years.
1. Uber Technologies: A Leader in Ride-Hailing
Shares of Uber Technologies (NYSE: UBER) have more than doubled since 2022, with analysts predicting annual earnings growth of 41% in the upcoming years.
Uber is witnessing an increase in user engagement, particularly with its food delivery service, Uber Eats. In Q3, revenue rose by 20% year over year, attributed to enhanced service quality and improved customer satisfaction.
As a profitable business, Uber earns revenue from various sources including fees from drivers and merchants. Additionally, its advertising revenue surged nearly 80% year over year last quarter, and Uber One memberships have exceeded 25 million. This growth in revenue could contribute to faster increases in operating income, which surged 169% in Q3 compared to the same period last year.
According to Statista, the ride-hailing market is projected to grow to $212 billion by 2029. Currently, investors can acquire Uber stock at a forward price-to-earnings multiple of 21, which is notably lower than the S&P 500’s forward P/E of 23.5. This positioning suggests that Uber could outperform the market over the next five years.
2. Meta Platforms: A Powerhouse of Advertising
Shares of Meta Platforms (NASDAQ: META) are reaching new heights in 2024, with further gains anticipated into 2025 and beyond. Analysts predict an annual earnings growth rate of 17% for Meta.
Meta generates substantial revenue through advertising on platforms like Instagram. With trailing revenue at $156 billion, the company is exploring artificial intelligence (AI) to accelerate its core business.
In Q3, Meta reported a 19% year-over-year revenue increase, driven partly by the popularity of its new conversational assistant, Meta AI, which boasts over 500 million monthly active users. This tool enhances user experience, leading to increased content engagement and more advertising revenue opportunities.
Additionally, over 1 million advertisers are utilizing Meta’s AI to generate advertisements, reporting a 7% rise in conversion rates when using these AI-enhanced tools. Although the increased investment in AI may temporarily pressure earnings, Meta is known for achieving high returns on its investments, suggesting that these initiatives could foster more profitable growth in the long run. CEO Mark Zuckerberg indicated that positive outcomes from these investments may become evident in the coming years.
With a forward earnings multiple of 24, the stock appears reasonably priced. At this valuation, investors could see share prices potentially double in the next five years, surpassing the S&P 500.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Uber Technologies. 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.
