Amazon.com (AMZN) has been one of the best investments in the stock market in the last decade, returning 1,500% in the past 10 years alone. It’s always difficult to see success like that ahead of time, but LendingClub (LC), 58.com (WUBA) and Splunk (SPLK) are all strong candidates to follow in AMZN’s footsteps.
AMZN shares several common themes with each of these three stocks. AMZN became such a hit because it was the early market leader in a massive and wide-open field of e-commerce. LC has a similar leadership position in the booming industry of alternative finance.
LendingClub is trying to use technology and the internet to disrupt the banking industry the same way that AMZN disrupted the retail business. In recent years, LC’s growth has been extremely impressive. According to Finviz, LC’s sales have grown at an average annual rate of 119.7% over the past five years. In addition, the company has a projected annual earnings growth of 74.1% over the next five years.
LC is also showing no signs of slowing down anytime soon. Last quarter, LC reported a year-over-year revenue gain above 90%.
Despite the massive revenue gains, Morgan Stanley reports that online lenders like LC have only captured about 3.3% of the total small business lending market so far and could account for about 20% of the total loan market by 2020. There is plenty of room for growth ahead for LC, and the company’s relatively small market share and only $2.9 billion market cap means that the stock’s share price could see some major upside if the business stays on track over the next 10 years.
Despite concerns over an economic slowdown in China, Boston Consulting Group (BCG) still projects a $2.3 trillion increase in China’s consumer economy by 2020 even if Chinese GDP growth falls well short of current projections. Of course, the closest thing China has to an AMZN analog is Alibaba (BABA). But with a market cap already nearly $200 billion, a 1,500% gain for BABA might be a bit of a stretch.
WUBA, on the other hand, has been described as the “Craigslist of China” and is demonstrating the ideal potential long-term upside combination of reasonably small $8 billion market cap, staggering growth and a massive potential market for its services. Last year, WUBA’s total revenue climbed 169.8% and its membership revenues surged 153.3% annually in Q4. In the past five years, WUBA has logged annual sales growth of 131.7%, and the company is projected to grow its earnings by 65.4% annually over the next five years.
SPLK is yet another company that is a leader in a market with massive long-term growth potential. Splunk specializes in analyzing, searching, sorting and interpreting machine-generated big data. Big data is going to be the key to the future of business. Generating the data is just the first step in the process for companies, and SPLK helps companies efficiently utilize that data to improve their businesses.
SPLK’s market cap is only $6.3 billion, but its revenue grew 49% last quarter. In the past five years, SPLK has averaged 58.8% sales growth per year, and it is expected to grow earnings by 49.4% annually over the next five years as well. SPLK’s growth is so strong and it’s market is so huge that the stock could certainly witness some AMZN-like growth in the next 10 years if the company continues to execute well.
Disclosure: As of this writing, Wayne Duggan was long BABA.