What a story of two markets 2020 revealed. In the first quarter, investors held the fastest beer market benchmark in history, with the benchmark S&P 500 34% of its value in less than five weeks. This was followed by the strongest quarterly rally in 22 years, and is supported by more than 30 record-breaking highlights for the technology-heavy Nasdaq Composite. To say that volatility of the charts has been would be a gross understatement.
Then again, volatility is actually the friend of investors in the long run. This is because it usually results in large stocks at a discount, which allows patient investors the opportunity to buy in and buy innovative companies on the cheap.
In particular, we have seen high-growth stocks die during the coronavirus 2019 handball (COVID-19). Apparently, the faster the growth of sales, the more robust the returns have been of late.
The thing is that bargains are still in abundance if your time horizon is at least five to 10 years. If you have $ 1,000 in reserve cash that is not needed to pay for tickets or cover emergency coal, then you have more than enough to invest in the next high-growth stocks, all of which are growing with minimal sales 100%.
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Square
Wall Street and investors expect strong sales growth from start-ups and even small-caps. But if you get sales growth of as much as 155% in 2020 (based on the high end of the current consensus) of a company with a market capitalization of $ 64 billion (as of Wednesday, August 5), that’s crazy! And that’s exactly why Square (NYSE: SQ) is still incredibly cheap, even after more than drowning its lowest March.
Last week, Square lifted the cap on its second-quarter results, and the company did not disappoint. The $ 1.92 billion in total revenue was nearly $ 800 million more than what Wall Street expected. Even though $ 875 million of this was tied up in bitcoin exchanges, it’s still quite impressive, especially when you consider that this was done during the height of the coronavirus lockdowns.
Compared to the first quarter, Square reported that 52% of its gross payroll (GPV) within its vendor ecosystem was derived from large companies – that is, a company that generates at least $ 125,000 in annual GPV. Although Square has traditionally been known as a payment facilitator for small businesses, its increased presence among larger businesses in an economy built around consumption seems to be a formula that will lead to a significant increase in buyer compensation.
Even more exciting was how well Cash App did in the second quarter. The company’s peer-to-peer payment platform now has 30 million monthly active users (MAUs), up from 7 million MAUs 2.5 years ago. Furthermore, the 7 million Cash Card members increased their spending by quarter over quarter by almost 50%. Cash App can generate money from buyers through transactions, make money from MAUs that accelerate transfers, and has the potential to bank from bitcoin exchanges.
Perhaps it’s no surprise that Wall Street believes that Square’s annual revenue will more than double between 2019 and 2023.
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Cresco Labs
Another high growth that both figuratively and literally “grows like a herb” is American cannabis multistate operator Cresco Labs (OTC: CRLB.F). Wall Street has seen Cresco grow 186% year-on-year this year, followed by another 80% increase in revenue in 2021.
Despite marijuana remaining illegally at the federal level in the U.S., the favoritism for pot has improved dramatically among the public in recent decades. This has allowed two-thirds of all states to legalize medical cannabis, with 11 states granting the OK for consumption and / or sale to adults. Since the black market for marijuana is massive, it is only a matter of time before these legal channels begin to flourish, regardless of whether the federal government is on board or not.
Cresco Labs in particular has two major catalysts. First is Illinois, which became the first state to fully legalize recreational consumption and sale of marijuana at the legislative level. Sales of weed for adult use began on January 1, 2020, and Cresco has opened eight dispensaries in the Land of Lincoln. By 2024, Illinois should have no problem generating at least $ 1 billion in annual sales from cannabis, and Cresco aims to secure itself a major chunk of that market share.
The other catalyst here is the purchase of Cresco from Origin House, which was completed in January 2020. Although the purchase of Origin House increases Cresco’s cultivation capacity, it was the cannabis distribution from Origin House in California that was the golden ticket for this deal. With this distribution license, Cresco can place its own pot products in more than 575 dispensaries throughout California, which happens to be the most lucrative marijuana market in the world through annual sales.
Cresco looks set to turn around the corner to return to profitability in 2021, and has a chance to reach $ 1 billion in annual sales as soon as 2022.
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Livongo Health
Third and last, consider a specialist in healthcare solutions Livongo Health (NASDAQ: LVGO), which is on track to more than double sales in 2020, and then its sales will almost double further by 2023.
Until this past Wednesday, Livongo Health’s growth has been virtually unfavorable in healthcare solutions and device space; then things got complicated. That’s because Teladoc Health (NYSE: TDOC) announced plans to merge with Livongo into a cash-and-stock deal – Livongo shareholders will receive 0.592 shares of Teladoc, along with $ 11.33 in cash, for each share in Livongo it owns.
At first I was not enthusiastic about this deal, especially considering the fact that Livongo has turned in three consecutive quarters of profit, and Teladoc is about 2.5 years away from returning profitability. What’s more, the combined company will not grow nearly as fast as Livongo Health.
However, I came across the combination of the two companies, especially when you consider the incredible growth path for both companies. Livongo, for example, increased the number of members of Diabetes enrolled in its services by 113% from the previous year’s period to more than 410,000. This figure represents only 1.2% of all diabetics in the United States. Keep in mind that Livongo is not yet pivotated to help patients with hypertension or chronic weight management problems, either. The growth of the trajectory is off the charts!
Teladoc will also not be too shabby. The shift to prescription medicine has gathered serious steam due to COVID-19, which increases the demand for telemedicine services for subscribers and fee-based patients. Being under the Teladoc umbrella will add an extra step for investors to see how fast Livongo Health grows, but nothing seems like it can stop this train.
