Two Outstanding Expansion-Driven Stocks Capable of Surpassing the S&P 500 Performance
Building wealth over the long term doesn't necessitate constant trades in trending tech stocks. Emulating Warren Buffett's approach of purchasing shares in quality businesses at fair prices can lead to successful investment journeys. Many investors use the S&P 500 as a benchmark, historically delivering a 10% annualized return, but a portfolio of well-selected growth stocks can surpass this index. Let's delve into two such companies expected to outperform the S&P 500 over the next five years.
1. Uber Technologies
Uber Technologies' shares have more than doubled since 2022, but analysts predict an astounding 41% annualized earnings growth in the following years. The service's popularity, particularly Uber Eats, has been on the rise, contributing to a 20% year-over-year revenue growth in Q3. Uber is not only profitable but also generates revenue through driver and merchant fees. New revenue streams, such as advertising and Uber One memberships, offer lucrative opportunities. Advertising flourished nearly 80% year-over-year in Q3, while Uber One boasts over 25 million members. This upward trend in revenue and operating income indicates a bright future for Uber.
As a leading brand in a burgeoning $212 billion ride-hailing market by 2029, according to Statista, Uber's stock seems undervalued with a forward price-to-earnings multiple of 21, smaller than the S&P 500's forward P/E of 23.5. Investors should expect Uber to surpass the market over the next five years.
2. Meta Platforms
Meta Platforms continues to set new highs in 2024, fueled by analyst predictions of an 17% annualized earnings growth over the next years. The company monetizes its platforms, such as Instagram, through advertising, making it a substantial business. Meta's conversational assistant, Meta AI, boasts over 500 million monthly active users, aiding content discovery and boosting user engagement. This trend underscores the opportunity for stronger advertising revenue.
Meta's generative AI tools enable over 1 million advertisers to produce ads with a 7% conversion growth, indicating that further AI investment could fuel continued growth and share price increases. Meta's high returns on invested capital ensure that these AI investments will lead to profitable growth steadily.
At a forward earnings multiple of 24, investors can expect comparable growth to future earnings, potentially doubling the share price in the next five years. If you're looking to beat the S&P 500, consider investing in these two exciting growth stocks.
- Incorporating Uber Technologies into a diversified portfolio could provide an excellent opportunity for long-term financial gain, given its projected annualized earnings growth and undervalued forward price-to-earnings multiple compared to the S&P 500.
- Meta Platforms, with its lucrative advertising revenue and investment in generative AI tools, presents a promising prospect for investors aiming to outperform the S&P 500. Analysts predict an impressive annualized earnings growth for Meta, making it a potential source of substantial returns on investment.
