It isn't hard to figure out why Amazon.comhas been one of the best-performing stocks over the past two decades. The e-commerce giant's top line has grown like wildfire since its founding in 1994 as more consumers warm up to the idea of shopping online. In turn, investors have bid up shares on the hope that the company's massive revenue growth will translate into huge profit growth, too.
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So what other companies could potentially grow at a breakneck speed over the next few decades? We asked a team of Fools that very question, and they pickedMercadoLibre (NASDAQ: MELI),WisdomTree Investments(NASDAQ: WETF),Illumina (NASDAQ: ILMN), First Solar (NASDAQ: FSLR), andNVIDIA (NASDAQ: NVDA). Read on to find out why.
Image source: Getty Images.
Look south for great growth
Dan Caplinger (MercadoLibre): To look for Amazon-like growth potential, it makes sense to stay in the same arena that Amazon serves while searching for a niche that the online retail giant hasn't yet sought to cover. MercadoLibre has that appeal, as it has set out to become the primary e-commerce giant serving the Latin American region. With hundreds of millions of potential customers in a rapidly growing part of the emerging world, Latin America gives MercadoLibre plenty of upside potential.
MercadoLibre has done a lot to build up an entire ecosystem to facilitate internet commerce. Starting with its premier marketplace site, MercadoLibre later added a variety of add-on services, including its MercadoPago payment system, MercadoEnvios for shipping, and a service to allow purchasers to get financing on what they buy when necessary. These ancillary businesses provide a full-service experience for MercadoLibre users, but they also have the potential to become independently successful in their own right and expand into more applications.
MercadoLibre does face the challenge of dealing with more volatile economic conditions. For instance, in recent years, Latin America largely missed out on the economic growth that the U.S. has enjoyed, because of falling commodity prices. That filtered through to MercadoLibre's prospects. However, with commodities starting to bounce higher, MercadoLibre has posted solid growth, and the runway for the e-commerce giant spans a long way into the future.
Sights set on the future
Rich Duprey(NVIDIA): After the run-up in value NVIDIA has had over the past few years, rising some 600% since 2014, it's easy to think its stock is priced for perfection. As it trades at 62 times trailing earnings and 44 times forward estimates, it's understandable why some are concerned about valuation. But at times some companies deserve the heightened expectations -- because their businesses are that good.
The depth and breadth of the graphics-chip maker's portfolio gives it a huge competitive advantage over rivals Inteland Advanced Micro Devices (NASDAQ: AMD), driving its leading GPU segment to exceed the market's growth. Notably, the segment isenjoying rapid adoption in AI, the cloud, gaming, and self-driving vehicles.That shows its importance not only in its mainstay gaming market, but also in the auto market, in the Internet of Things, and as part of devices that are pushing the boundaries of virtual reality and machine learning. GPUs are perhaps at the core of the wave of the future: deep learning that will literally drive the driverless cars, advance healthcare, and more.
NVIDIA's leadership has come at the expense of Intel and AMD, but make no mistake: It's still gaming that is the moneymaker here, accounting for more than 60% of total revenue as its GeForce GPU continues to fuel strong adoption of its Pascal architecture. AMD's Polaris processors may help lift its performance, but they still lag far behind NVIDIA's offerings.
The chipmaker may have to do everything right, but it's proving that it is capable of doing so, and it routinely exceeds even its own forecasts of growth. It expects fourth-quarter revenue to come in at $1.9 billion, give or take, which would be a nearly 50% year-over-year increase -- a goal well within its reach.
No company can grow continuously in a straight line, and there will be hiccups along the way for NVIDIA, but there's no reason to think that, even if investors get nervous again, the strength of its business won't be able to continue driving it higher to achieve Amazon-like growth.
A genomic-sequencing leader
Brian Feroldi(Illumina):While the human genome was first decoded more than a decade ago, I'd bet that you still haven't had your DNA sequenced. That's becauseit still costs more than $1,000 to do so, which is a price tag that is still too high to drive mass adoption.
However, I'd bet that you will have your genome sequenced in the next decade or so as costs continue to fall. If I'm right, then Illumina -- a leading provider of genomic-testing equipment -- looks poised for massive growth from here.
Illumina is the dominant player in the genomic-sequencing market. The company sells both the machines that sequence the DNA and the supplies that are needed to run each test. This razor-and-blade model has allowed Illumina's revenue to rise rapidly even while the cost of performing a test has fallen dramatically. Here's a great chart that shows this phenomenon in action:
Image source: Illumina. CAGR = Compound annual growth rate.
Recently, Illumina stunned the markets with the launch of its NovaSeq series, which is a next-generation testing system that promises to drive down the costs of sequencing a genome to as little as $100. With a price point that low, I could easily see this technology going mainstream.
But what can healthcare providers do with the information gathered through DNA sequencing? To help find out, Illumina has teamed up with IBMand Philipsto create new tools that will standardize and simplify data interpretation. If successful, the project could help providers identify diseases at far earlier stages than current technology allows.
In total, Illumina's new technology could help to revolutionize the world of healthcare as we know it today. If this pans out, then Illumina could be poised to deliver decades of top- and bottom-line growth.
The future is bright for First Solar
Jason Hall(First Solar): Solar and renewable energy stocks are likely to get trashed in the near term, as President Donald Trump's administration makes good on his campaign promise to cut regulations. And while a lot of investor money will shift away from renewables and chase after the companies that could benefit in the short term, the long term remains in the favor of companies like First Solar.
This is because, even as the Trump administration announces plans to cut emissions regulations across the transportation, automotive, and utility industries in the United States, the rest of the developed world is putting more emphasis on renewables. And with the bulk of global population expansion -- particularly in the energy-consuming middle class -- happening outside North America over the next several decades, don't let local politics cloud your view when it comes to the growth prospects for First Solar.After all, the company already derives nearly half of its business outside North America.
There's a good chance the market will remain very unfavorable on First Solar's stock in the short term. But looking out years down the road, billions of new global middle-class members will be relying on solar all over the world, no matter what U.S. politics and regulations look like. If you're willing to ride out short-term choppiness completely unrelated to the big picture, and potentially get Amazon-like returns, First Solar is a great stock to own.
A bet on index funds
Jordan Wathen(WisdomTree Investments): WisdomTree Investmentscurrently dominates in an obscure corner of the index fund world. WisdomTree's most popular funds allow you to invest in Japanese and European stocks without exposing yourself to currency risk.
The bad news is that investors have turned cold on the strategy. The company's currency-hedged funds, which held about $39.2 billion in assets at their peak in the second quarter of 2015, ended the fourth quarter of 2016 with just $18.8 billion in assets.As the dollar strengthened, investors now want to bet on a weaker dollar, a bet that WisdomTree funds aren't particularly useful for.
Luckily, the company has a few other emerging strategies. Its domestic dividend funds are proven winners and have been excellent asset gatherers. It has also expanded abroad to start new exchange-traded funds in markets that aren't as saturated with ETFs as American stock exchanges.
I see WisdomTree as something of a lottery ticket in an industry that should see its assets under management grow at a high-single-digit clip for a long time to come. For a levered company like WisdomTree, that can easily turn into years of double-digit earnings growth.
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Brian Feroldi owns shares of Amazon and MercadoLibre. Brian Feroldi has the following options: short January 2019 $185 puts on IBM, short January 2019 $180 puts on IBM, long January 2018 $175 calls on IBM, and short January 2018 $175 puts on IBM. Dan Caplinger has no position in any stocks mentioned. Jason Hall owns shares of Amazon, First Solar, Intel, and MercadoLibre. Jordan Wathen has no position in any stocks mentioned. Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Illumina, MercadoLibre, and Nvidia. The Motley Fool recommends Intel and WisdomTree Investments. The Motley Fool has a disclosure policy.