Dogecoin (CRYPTO:DOGE) has been everywhere in the information in 2021, and for good purpose. By early Could 2021, this meme-inspired cryptocurrency had gained over 12,000% because the begin of 2021. And even now, when Dogecoin is greater than 40% beneath its all-time excessive of $0.74, it’s nonetheless 6,880% up to this point this 12 months (as of this writing).
However Dogecoin is extraordinarily risky, and isn’t backed by any asset. Its rally has been primarily fueled by Reddit hype and superstar endorsements. Dogecoin has no important aggressive benefit over different cryptocurrencies — be it transaction charges or cost speeds. Retail traders ought to keep away from such speculative investments to safeguard their portfolios from excessive ups and downs.
As an alternative, I’ve three firms in thoughts which might be driving big secular tailwinds and may develop dramatically within the coming months — all with out considerably rising your portfolio threat. Let’s examine why PayPal Holdings (NASDAQ:PYPL), Lemonade (NYSE:LMND), and Novocure (NASDAQ:NVCR) match the invoice.
Picture supply: Getty Pictures.
1. PayPal
A pioneer in digital funds, PayPal has benefited dramatically from the accelerated adoption of e-commerce and digital transactions, a development that can probably proceed after the pandemic ends.
On the finish of the primary quarter (ended March 31), PayPal had 392 million energetic buyer accounts and 31 million service provider accounts on its platform. As increasingly customers be a part of PayPal, the cost facilitator turns into much more unavoidable for companies, which then attracts much more clients. This community impact is troublesome to disrupt and is a stable entry barrier for competitors.
To draw much more clients, PayPal has targeted on introducing a variety of progressive services and products corresponding to cashless cost options for in-store purchases together with cost playing cards, QR codes, and tap-and-pay and purchase now, pay later functionality for its PayPal and Venmo wallets. For patrons utilizing purchase now, pay later, PayPal has famous a 15% improve in whole cost quantity and 16% decline in value per transaction (since debit funds are cheaper).
Within the first quarter, PayPal income, adjusted earnings per share (EPS), and free money stream soared 12 months over 12 months by 31%, 84%, and 27%, respectively. The corporate expects its whole energetic accounts to extend by 52 million to 55 million in fiscal 2021 and TPV to leap 12 months over 12 months by 30%. PayPal is now anticipating its fiscal 2021 income and adjusted EPS to be up 12 months over 12 months by 20% and 21%, respectively, in fiscal 2021.
Buying and selling at 13.6 instances trailing-12-month (TTM) gross sales, PayPal isn’t the most affordable inventory in the marketplace. Nonetheless, in a world quickly going cashless, this digital funds large could be a pretty funding for retail traders even at these elevated ranges.
2. Lemonade
Insurance coverage expertise firm Lemonade’s inventory is over 47% beneath its all-time excessive of $190 from January as of this writing. Buyers are upset by the corporate’s first-quarter (ended March 31) loss ratio (share of claims incurred to premiums collected) of 121%, which is dramatically greater than the 71% for fiscal 2020. The property injury attributable to Winter Storm Uri in Texas resulted within the firm processing “a 12 months’s value of claims in just some days.” Such pure catastrophes are largely unpredictable, though some quantity of draw back could be protected by reinsurance.
Regardless of these challenges, Lemonade has proven progress the place it really issues. Within the first quarter, the corporate’s whole clients rose 50% 12 months over 12 months to 1.1 million, in-force premium (combination annualized premium) was up 89% to $252 million, and premium per buyer rose 25% to $229. These numbers spotlight the energy of Lemonade’s tech-enabled disruptive customer support mannequin, which permits customers to buy insurance policies and course of claims in a matter of minutes. The corporate’s foray into pet insurance coverage, life insurance coverage, and now automotive insurance coverage has additionally opened a number of cross-selling alternatives.
Lemonade now expects its fiscal 2021 income to rise by 24% to twenty-eight% 12 months over 12 months, up from the earlier steerage of 21% to 24%. The corporate additionally maintained its earlier EBITDA loss steerage of $163 million to $173 million, regardless of greater losses incurred within the first quarter. Lastly, the corporate is sitting on a $1.03 billion unrestricted money pile, which is enough to cowl most of its losses a minimum of for the subsequent few years.
Lemonade is buying and selling at a wealthy price-to-sales (P/S) a number of of about 59. Nonetheless, contemplating that the corporate collects over 100 instances extra information from its clients than conventional insurers, Lemonade can leverage its synthetic intelligence (AI) capabilities to develop a a lot stronger buyer expertise and threat administration system. The corporate makes use of AI-based bots and information capabilities for buyer acquisition and claims processing, which helps it cut back its payroll bills. This technology-focused method has enabled the corporate to supply cheaper insurance policies for comparable protection. Therefore, youthful clients (with greater lifetime worth) are more and more choosing Lemonade over conventional insurers. In opposition to this backdrop, the corporate presents a pretty risk-reward proposition to long-term traders, even at greater valuation ranges.
3. Novocure
Medical machine firm Novocure has give you a novel expertise to combat aggressive cancers. The corporate’s flagship product is a wearable and transportable machine referred to as Optune, which works by creating tumor-treating fields (TTFs). These are electrical fields that assist management most cancers cell division with out affecting wholesome cells.
The U.S. Meals and Drug Administration (FDA) has already permitted using Optune for treating mesothelioma (a uncommon most cancers prompted because of asbestos publicity) and for 2 varieties of glioblastoma multiforme (GBM), which is aggressive mind most cancers. Within the first quarter, the corporate’s energetic sufferers rose 12% 12 months over 12 months to three,454. Whereas GBM is the corporate’s foremost income driver, there’s nonetheless a lot room to develop contemplating that penetration on this indication within the U.S.; Europe, the Center East, and Africa (EMEA); and Japan is simply 37%, 34%, and 31%, respectively.
Novocure’s TTF remedy can also be being evaluated in different aggressive cancers corresponding to non-small cell lung most cancers (NSCLC), pancreatic most cancers, ovarian most cancers, and gastric most cancers. Investor hopes are excessive for these pipeline packages, particularly after the FDA allowed the corporate to cut back the enrollment requirement for the management arm within the section 3 pivotal Lunar trial evaluating the efficacy of TTFs in superior NSCLC. This choice relies on an interim evaluation of the trial by an unbiased information monitoring committee. In accordance with the committee, “it’s probably pointless and presumably unethical for sufferers randomized to the management arm to proceed accrual to 534 sufferers with 18 months follow-up.” Whereas the scientific trial information is blinded for Novocure, it’s fully unblinded for for the information monitoring committee. With the committee contemplating it unethical to refuse TTF remedy to sufferers within the management arm, it appears apparent that Novocure’s product is demonstrating important scientific advantages.
Within the first quarter, the corporate’s income was up 12 months over 12 months by 32% to $134.7 million, whereas adjusted EBITDA rose 40% 12 months over 12 months to $21 million. The corporate had $864 million of money on its stability sheet at finish of the primary quarter. Not like many medical expertise firms with progressive merchandise, Novocure is already worthwhile. In fiscal 2020, the corporate reported a web earnings of $20 million. In opposition to this backdrop, regardless of buying and selling at a P/S a number of of over 40, the inventory can show to be a pretty funding for retail traders.
This text represents the opinion of the author, who might disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even one in every of our personal — helps us all assume critically about investing and make selections that assist us change into smarter, happier, and richer.
