When Wall Street is worried about the economy and the market keeps falling, focusing on the fastest-growing companies can help you discover the best stocks. If a company can deliver revenue growth above 50% when the outlook for the economy is weakest, it must be providing something of great importance to customers.
StoneCo(NASDAQ: STNE), FuboTV(NYSE: FUBO), and Snowflake(NYSE: SNOW) are three companies that continue to report high 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 experienced accelerating growth over the last year, and the stock has already won a spot in Warren Buffett's portfolio at Berkshire Hathaway. It offers 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 grew 87% year over year in the first quarter, up from 51% in the fourth quarter. The company's momentum is being driven by rising demand from consumers and merchants for digital payment solutions. Management sees a huge opportunity to expand, considering that the penetration of software in Brazil is still low compared to North America.
Part of StoneCo's recent acceleration in revenue was management's new pricing policy to increase the fees charged for transactions. Despite these higher fees, total merchant payment volume still climbed 93% year over year, a slight acceleration over the previous quarter's 87% growth. This suggests StoneCo offers a compelling value proposition to customers with tremendous pricing power built into its business.
Revenue is expected to climb between 148% and 154% year over year in the second quarter. Investors should pounce on this opportunity while the stock trades at a cheap price-to-earnings ratio of 31.
Fubo has benefited from cord-cutting, as people look for alternatives to expensive cable subscriptions. Fubo is winning over subscribers in droves for its sports-centric menu, but Fubo also has a compelling lineup of local news and entertainment channels to round out its offering.
The company's revenue growth has been off the charts, with first-quarter revenue doubling year over year while subscribers grew 81%. Both metrics have consistently been above 100% in recent quarters.
Fubo's growth trajectory is starting to make the stock's recent collapse look like a great buying opportunity.
The stock is down 91% over the last year, which puts FuboTV's market cap (shares outstanding times the stock price) at just $483 million. Investors are concerned about the sustainability of these strong revenue numbers, not to mention the company's losses on the bottom line amid a competitive market for live TV streaming.
However, no other streaming platform offers the breadth of sports programming along with Fubo's integrated sports betting feature. The company has been approved to offer sports betting in a limited number of states so far, but Fubo is positioning to capitalize big time on the growing demand sweeping across the U.S.
With just over 1 million paying subscribers, there are tens of millions of households for FuboTV to win over. If you have a high risk tolerance, Fubo offers more than enough upside to compensate.
Cloud services is one area of the economy that is holding up well in 2022. No matter how bleak the near-term economic picture looks, companies must spend on cloud migration to stay competitive.
Snowflake offers a single platform for companies to derive meaningful business insights from their data. Snowflake's Data Cloud platform integrates with other cloud service providers, such as Amazon and Microsoft, and Snowflake only charges companies for the resources they use, which helps them save money.
Snowflake has consistently been doubling its revenue year over year in recent quarters. It posted growth of 84% in the fiscal first quarter ending in April. It also reported a net revenue retention rate of 174%, which means customers continue spending on more services the longer they stick around.
The ability for companies 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 incentivizes companies to stick with Snowflake for the long term.
The shift from on-premise servers to the cloud will take many years to play out and will no doubt create tremendous wealth for investors that own the right cloud stocks. Snowflake estimates its addressable market at $248 billion, which is massive compared to its annual revenue of $1.4 billion. Due to its consistent growth and the recent dip in the share price, I recently added Snowflake to my personal holdings.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard has positions in Amazon, Snowflake Inc., and Stoneco LTD. The Motley Fool has positions in 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 January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.