Two tech companies with potential to yield substantial wealth for investors.
Investing a modest sum and growing it into a substantial wealth requires clever decision-making and diversification. You can never pinpoint with absolute certainty which stocks will meet your expectations, but having a diverse portfolio of growth stocks can boost your chances of encountering a game-changing return.
With that in mind, let's explore two rapidly growing companies that could potentially elevate your initial investment over the long haul.
1. C3.ai
Given the escalating demand for enterprise artificial intelligence (AI) software, this sector offers prime grounds for future champions. Statista forecasts the overall AI market to surge at a 27% annual rate through 2030, reaching an astounding $826 billion[1]. Entering the fray with a robust presence in this sector is C3.ai, a prominent contender in the U.S. for providing enterprise AI software to major corporations and the military. Revenue for the company is growing in tandem with these estimations.
Revenue growth has shown a consistent upward trend for the past seven quarters, topping off at a 29% year-over-year increase in the most recent quarter. A significant driving force behind this progress is partnerships with leading cloud providers, such as Microsoft's Azure cloud services. Recently, Microsoft expanded its collaboration with C3.ai, which indicates promising developments for the company's growth prospects. In Q1 alone, C3.ai secured 58 agreements, including notable names like ExxonMobil, Coca-Cola, and various U.S. government agencies.
The downside to C3.ai lies in its weaker profitability, as it reported an adjusted net loss of $0.06 per share in its latest quarter. Although profits might lag behind revenue growth in the interim, C3.ai's management aims for the top line to grow faster than expenses in the long term. With that, C3.ai's stock value could hold considerable significance in another 10 years.
Despite being a relatively small business with a $346 million trailing-12-month revenue, C3.ai managed to close Q1 with an impressive $730 million in cash and short-term investments. Those willing to endure near-term volatility in the stock price could potentially be handsomely rewarded in the future.
2. Shift4 Payments
Shift4 Payments, an up-and-coming software and payment processing company, has made considerable strides in the hospitality, dining, and entertainment industries. They either hold leadership positions or are the number 2 choice in these markets. The company's quarterly revenue growth has averaged a spectacular 36% year-over-year over the past two years, signaling a vast opportunity[1].
A key trend fuelling Shift4 Payments' growth is the seamless transition from using multiple software services to a single comprehensive solution. For instance, a hotel might utilize disparate software for check-ins and restaurant management, leading to inefficiencies and extra costs. Shift4 Payments provides solace by offering an end-to-end system that manages payments, security, reporting, analytics, and more.
Shift4 Payments is successfully expanding its footprint by acquiring other businesses with sizeable client pools. Upon acquiring a company, Shift4 can later cross-sell their services to newly acquired clients, creating opportunities for revenue growth.
The financing for these acquisitions has burdened Shift4 Payments with a substantial $2.8 billion in long-term debt, but they also boast a robust balance sheet with $1.4 billion in cash. Moreover, they have reported a staggering 56% year-over-year increase in net income through the first three quarters of 2021, reaching a substantial $113 million.[1]
The stock has been on a roll, surging 86% over the past three years. With this trajectory, Shift4 Payments could potentially offer years of compounding returns to its investors. The stock is priced at 22 times this year's earnings estimate, which is a moderate valuation for a fast-growing payments company.
After careful consideration, investing in C3.ai or Shift4 Payments could significantly enhance your initial finance, given their potential for substantial growth. In the case of C3.ai, their strong revenue growth, strategic partnerships, and impressive cash reserves make it an appealing investment opportunity for those willing to weather near-term volatility. Similarly, Shift4 Payments' dominance in the hospitality, dining, and entertainment industries, along with their promising financials and acquisition strategy, make it another potential money-making venture in the realm of investing.
