Many growth-oriented investors flocked toward cryptocurrencies over the past few years as the prices of Bitcoin, Ethereum, and other digital tokens skyrocketed. But last year, the crypto market crashed as rising interest rates and other macro headwinds drove investors toward more conservative investments.
As that crypto winter drags on, it might be a good idea to pivot back toward traditional growth stocks. So today, I'll examine three high-growth stocks that could still outperform the world's top cryptocurrencies: cloud darling Snowflake (SNOW 5.77%), electric vehicle maker Lucid (LCID 5.15%), and Latin American e-commerce giant MercadoLibre (MELI 1.86%).
Image source: Getty Images.
1. Snowflake
Large companies often store their data across a wide range of computing platforms and software. Over time, those fragmented silos can make it difficult to make efficient data-driven decisions. Snowflake eliminates that friction by breaking down the silos, collecting all of the data, and storing it on a cloud-based data warehousing platform that can be easily accessed by third-party apps and data visualization services.
NYSE: SNOW
Key Data Points
Snowflake's clients only pay for the computing power and storage they need instead of paying recurring subscription fees. Its clients also don't need to tether themselves to a data warehousing service that is integrated into a dominant cloud service like Amazon Web Services (AWS) and Microsoft Azure.
Snowflake's disruptive approach and flexibility have made it one of the market's fastest-growing cloud stocks. Its product revenue rose 120% in fiscal 2021 (which ended in January 2021) and jumped 106% in fiscal 2022, and it expects 68%-69% growth in fiscal 2023. Snowflake forecasts its product revenue will hit $10 billion by fiscal 2029, which implies its top line will increase at a compound annual growth rate (CAGR) of 36% from fiscal 2022. By the end of fiscal 2029, the company expects roughly 1,400 of its customers to contribute over $1 million in annual product revenue, compared to just 287 in its latest quarter.
Snowflake isn't profitable yet, but economies of scale could quickly kick in if it achieves its hypergrowth goals. The stock isn't cheap at 18 times next year's sales, but it could generate better returns than any cryptocurrency.
2. Lucid
Another speculative hypergrowth stock that could outperform any digital token is Lucid, the luxury electric vehicle maker that went public by merging with a special purpose acquisition company (SPAC) in 2021. Lucid got off to a rough start: After initially claiming it could produce 20,000 vehicles in 2022, it only produced 7,180 vehicles for the year as it struggled with supply chain constraints. Safety-related recalls and the cancellations of existing reservations caused additional headaches.
NASDAQ: LCID
Key Data Points
It's tempting to dismiss Lucid as another failed SPAC-backed EV maker, but it has one major advantage versus its peers: the support of the Saudi Arabian government. Saudi Arabia's Public Investment Fund (PIF) owns nearly two-thirds of Lucid's shares, and the Saudi Arabian government is subsidizing the construction of Lucid's first overseas plants in the country, which could enable it to produce about 500,000 vehicles annually by 2025.
That would represent a jaw-dropping CAGR of 311% from 2022. The Saudi Arabian government also plans to buy up to 100,000 vehicles from Lucid over the next 10 years, and recent rumors suggest the PIF could even take over Lucid by buying the rest of the shares it doesn't already own.
Lucid is still deeply unprofitable, but it isn't terribly expensive at 8 times next year's sales. If the Saudi government remains committed to helping Lucid achieve its lofty production targets for 2025, we could see its stock generate massive multibagger gains over the next two to three years.
3. MercadoLibre
Last but not least, MercadoLibre, the top e-commerce company in Latin America, could still have a lot more room to run over the next few years. Its annual revenue rose at a CAGR of 53% from 2016 to 2021, and analysts expect its revenue to continue increasing at a CAGR of 32% from 2021 to 2024 as it continues to expand its e-commerce and fintech ecosystems. It served 127 million unique active users in the first nine months of 2022, but that only represents less than a fifth of the total population of Latin America and the Caribbean Islands.
NASDAQ: MELI
Key Data Points
According to Americas Market Intelligence, the e-commerce sectors of MercadoLibre's three largest markets -- Brazil, Argentina, and Mexico -- could expand at CAGRs of 22%, 32%, and 24%, respectively, from 2021 to 2025. If MercadoLibre merely maintains its leadership position in those markets, it could generate multibagger gains in the near future.
MercadoLibre still faces stiff competition from regional challengers, unpredictable currency headwinds caused by inflation, and other macro challenges. But it's also firmly profitable and has a massive head start against its domestic and overseas rivals, and its stock still looks reasonably valued at less than 5 times next year's sales. Once the market recognizes the long-term growth potential of MercadoLibre again, I expect it to easily outperform any of the top cryptocurrencies.
