2 growth stocks that could beat the market in the next 10 years

Truly great companies that transform an entire industry can provide years of phenomenal returns… if you can find them. Lending is one of the oldest industries in society, where basics like credit scores and credit cards have dominated for years. The next two stocks have a lot to prove, but they could offer years of bullish growth in the market if they can change the way consumers take on debt.

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Smarter lending decisions

upstart holdings (UPST 6.70%) uses artificial intelligence to make credit loan decisions. The FICO Credit score is the traditional measure of a consumer’s creditworthiness, but Upstart claims its AI can reduce loan defaults by 75% while approving borrowers at the same rate. The company started with unsecured personal loans, but recently launched auto loans, with small and business loans imminent, and mortgages still ahead in Upstart’s future growth plans.

The company generates most of its revenue from fees generated when its lending partners originate an Upstart loan. Upstart had just 10 banking partners when the company did its initial public offering in late 2020, but it had 57 in the company’s quarter ending March 31, 2022. Additionally, 11 of them now do not have a minimum FICO requirement. for borrowers, a sign of confidence that Upstart’s technology is working as intended.

Investors recently chastised Upstart for lowering its 2022 earnings guidance when it reported first-quarter 2022 earnings, but the long-term outlook looks bright. More than 10,000 banks and credit unions operate in the United States. As long as lenders continue to partner with Upstart, it has ample room for expansion, especially as it enters new loan categories.

The stock now has a market cap of just $4 billion, and just under $1 billion of that is cash! Meanwhile, Upstart still expects 47% revenue growth in 2022, with a forecast of $1.25 billion. The company is also profitable, generating $158 million in net income over the past year. A recession could affect trading results, so investors should expect some volatility. However, the long-term advantage looks compelling if Upstart’s business continues to thrive for years to come.

Cancellation of credit cards

affirm holdings (AFRM 5.15%) is a buy now, pay later company that uses AI to make lending decisions, often at the consumer point of sale. It is trying to displace credit cards by offering more consumer-friendly loan terms. For example, Affirm doesn’t charge late fees and often offers 0% interest rates on certain purchases.

The company makes money at both the consumer and merchant levels; It charges consumers interest-bearing loans and makes merchants pay fees such as transaction fees that Affirm touches. Consumers benefit from friendly and flexible payment options. Meanwhile, Affirm claims its service increases merchant sales and reduces the need for discounts. It’s beneficial for both users and merchants, and Affirm makes money on both ends of the equation.

Affirm has largely focused on getting its technology in front of as many users as possible, striking partnerships with e-commerce companies like Amazon, Shopify, walmart, GoalY fair way. Collectively, these partners cover about 60% of the US e-commerce landscape, plus thousands of smaller merchants and brands. Affirm has 207,000 merchants and 12.7 million users on its platform as of the quarter ending March 31, 2022.

Management estimates that the company’s total addressable market will grow to $1.5 trillion in transaction volume by 2025. Affirm’s $13 billion volume over the past year indicates plenty of room for long-term growth.

Like Upstart, the stock has fallen dramatically from highs of $176 to $14. At its current price of $25, the stock’s market capitalization is just $7 billion. Affirm, meanwhile, is targeting $1.3 billion in revenue for its 2022 fiscal year, a 49% increase from 2021. The company will need to show it can handle a recession in which consumers are spending less and potentially defaulting more, but investors they could see huge returns in the future. long term if things work out.

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