S.tocks had a surprisingly strong upward trend over the past year despite the tragedy and disruption caused by the pandemic. With valuations reaching expensive levels for many growth stocks, there are still stocks you can buy today that will be worth far more in the future.
For this reason, investors should consider buying shares of Shopify (NYSE: SHOP), Peloton interactive (NASDAQ: PTON), and Apple (NASDAQ: AAPL) to your investment portfolio.
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Shopify provides software tools and point-of-sale solutions for businesses of all sizes to grow and be more efficient in the digital economy. It has tremendous growth opportunities to gain a larger share of the global retail market, valued at over $ 20 trillion, with e-commerce trading at $ 4 trillion. Despite Shopify’s phenomenal growth over the past few years, the trailing 12-month gross merchandise volume (GMV) on its platform is still relatively small at $ 151 billion.
The boundaries between e-commerce and stationary shopping are becoming increasingly blurred. Shopify continues to see strong growth with GMV up 40% year over year in the second quarter. This growth is happening as more retailers reopen their doors as pandemic restrictions were eased this year. Last quarter, Shopify reported that GMV is growing faster than total GMV in locations that have reopened.
As merchants grow their businesses, Shopify shares in their success. The company offers merchant solutions that include additional services for things like Shopify Capital and shipping services. In 2020, retailer solutions revenue more than doubled to $ 2 billion, growing faster than subscription solutions, including the fees that retailers pay to join the Shopify platform.
This is not a stock for value hunters. Before you invest in Shopify, you need to believe in the long-term future as the stock is expensive with a price to sales ratio of 49. However, I believe that investors who buy and hold this stock will see their initial investment increase in value over time.
Peloton is in a great position to meet the growing demand for fitness solutions for the home. The stock is down 27% since the start of the year as the company was forced to recall its treadmill products due to a safety issue earlier this year. Additionally, investors are concerned about possible headwinds to short-term growth when the economy reopens. However, these should be short-term bumps on the road that will happen at some point.
Peloton has grown incredibly quickly over the past few years and there are still plenty of options. In fiscal 2017, Peloton only had sales of $ 186 million, but in fiscal 2020 (which ended in July) sales reached nearly $ 1.5 billion. Management expects sales of $ 4 billion in fiscal 2021. In the 2022 financial year, the management sees further impetus for the business due to the reduced price for the original bike model and the international expansion.
Peloton is relocating part of its manufacturing to the US, which aims to improve the customer’s shopping experience through more efficient delivery speeds. This move follows on from the Precor acquisition last year, which Peloton is also positioning for growth in hotels and colleges.
With the beginning of the international business “to fire on all cylinders”, as CFO Jill Woodworth reported during the conference call for the third quarter of the fiscal year, Peloton is really just beginning. Management believes the globally addressable market for its products could be in excess of 180 million. It ended the last quarter with just 2.08 million subscribers to its connected fitness products (Bike and Tread), which speaks volumes about its growth potential. The sell-off is a great opportunity to buy stocks before investor sentiment returns.
For investors looking for a relatively safe growth stock, Apple is the one. The installed base of active devices has increased in recent years and reached 1.65 billion at the beginning of the year. This growth is fueling Apple’s higher-margin services, including subscriptions to Fitness + and Apple TV +, as well as purchases in the App Store and Apple Pay. That makes Apple a monster cash cow.
Revenue from services increased 28% year over year in the nine month period to the third quarter of the fiscal year. The iPhone 12 has had a great response from customers, which appears to have led to additional spending on subscriptions and apps. Services hit a new record last quarter, but the upcoming launch of the new iPhones this fall should further boost service revenue.
At the end of July, various reports surfaced that Apple was expecting great demand for the iPhone 13. As strong as the iPhone 12 sales have been, there are still plenty of users who haven’t made the switch to 5G, causing an explosive demand after the reboot.
A new round of iPhones is always a good growth catalyst to consider every year, but don’t fall into the trap of buying Apple stock for that reason alone. Fortunately, Apple has all of the qualities a long-term investor could want in a core investment.
Apple is one of the most recognizable brands in the world, generating a massive $ 95 billion in free cash flow, of which it pays a small quarterly dividend to shareholders. The current annual dividend yield is 0.57%. This highly profitable tech stock should reward investors for years to come.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Peloton Interactive, and Shopify. The Motley Fool recommends the following options: long January 2023 $ 1,140 calls on Shopify, long March 2023 $ 120 calls on Apple, short January 2023 $ 1,160 calls on Shopify, and short March 2023 $ 130 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.