Investing in Growth: Two Stocks to Consider for High Returns
The stock market has historically produced an average annual return of approximately 10% over the decades. To double your investment in five years, an annualized return of 15% is essential. Achieving this rate may be simpler than you expect. Investors aiming for such returns should seek out exceptional businesses capable of sustaining above-average growth over several years.
Below are two elite growth stocks that fit this criterion.
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1. Meta Platforms
Artificial intelligence (AI) has significantly benefited Meta Platforms‘ (NASDAQ: META) leading social media sites like Facebook and Instagram. The company has posted impressive financial outcomes, and despite the stock surge in recent years, it still trades at a reasonable valuation with potential for further upside.
In 2024, Meta reported a revenue growth of 22%, as advertisers continue to seek exposure to over 3.3 billion daily users of its platforms. Additionally, the Meta AI assistant has attracted 700 million users, with expectations of reaching 1 billion by 2025.
Meta’s AI success is largely due to its development of the Llama large language model. While it does not currently rival other models such as those from OpenAI, xAI, or Alphabet‘s Google, Meta has the resources to invest in leading-edge chips from Nvidia to enhance its AI offerings over time. The company plans to allocate approximately $60 billion to $65 billion on capital expenditures for AI and other operational needs this year.
As Meta AI continues to evolve, it may create additional revenue streams. Currently, users employ Meta AI for tasks like writing, research, and recommendations. Management is presently focused on providing the assistant for free to increase engagement across its apps, which ultimately drives advertising revenue. However, hints have been dropped indicating that paid services may be forthcoming.
Despite significant investments in AI infrastructure, Meta is already experiencing high margins. Once AI services begin generating additional revenues, the profit margin could surge, benefiting both earnings growth and the stock price.
Analysts anticipate earnings growth at an annualized rate of 18% in the coming years. Currently, the stock is trading at a forward price-to-earnings ratio of 26. If the stock maintains this earnings multiple, this growth rate could easily double the share price within five years.
2. Monday.com
Shares of Monday.com (NASDAQ: MNDY) have surged 126% since hitting a low in 2022. The company is capitalizing on the increasing demand for automated work management solutions, tapping into a substantial market opportunity.
Over the past five years, Monday’s customer base has expanded at an annualized rate of 22%. The company maintained strong momentum with revenue rising 33% in 2024.
Monday.com is beginning to explore opportunities within AI. Initial demand for Monday Service, a new AI-enabled offering designed to streamline business operations, has been robust. The company has also introduced a consumption-based pricing model for AI features on its platform, making it accessible for more customers while catering to larger businesses with greater demands.
Continuing to roll out new services and tools is helping Monday gain traction in acquiring larger enterprise clients. The number of clients generating annual recurring revenue over $100,000 grew by 45% last year, while the segment of customers with only ten or more users saw a growth of 10%.
This trend of securing deals with larger enterprises bodes well for Monday’s long-term growth. Larger companies generally have more complex requirements, and Monday’s capacity to meet these needs positions it for continued success.
Valuation reflects Monday’s long-term potential, with the stock trading between 9 to 18 times sales since late 2022. Assuming the stock remains valued around 10 times sales and the company sustains revenue growth above 20% annually, shares could effectively double by 2030.
Should You Invest $1,000 in Meta Platforms Right Now?
Before investing in stock of Meta Platforms, consider the following:
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Randi Zuckerberg, 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. Suzanne Frey, an executive at Alphabet, is also on the board. John Ballard holds positions in Nvidia. The Motley Fool has investments in and recommends Alphabet, Meta Platforms, Monday.com, and Nvidia. 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.
