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A common hope among growth investors is to find a stock that will make them a millionaire with a small investment.Technology stocks such as Amazon and Microsoft Such a feat has been achieved for long-term investors.
But because these companies are mature and growing at a slower pace, the goal is to find the next Microsoft. The following two small companies have growth prospects that could translate into millionaire potential.
1. Digital Ocean
digital ocean (DOCN -2.30%) It may not look like a millionaire maker at first glance. It’s one of many cloud infrastructure providers, and compared to rivals like Amazon and Microsoft, you might wonder how it stacks up against a company with a market capitalization of less than $4 billion.
DigitalOcean primarily serves small and medium-sized businesses (SMBs), which number 33 million in the United States alone, according to the U.S. Small Business Administration. To do this, the company has developed a business model that larger enterprises cannot compete with without hurting their own business.
For one, it has transparent pricing, which means businesses only purchase the services they need. Second, it offers the DigitalOcean Community, a combination of educational materials and additional user access that can help small businesses solve IT-related problems without the need for expensive personnel.
Additionally, the emergence of artificial intelligence (AI) is likely to spur demand for its services. Nvidia The price of each H100 AI chip is about US$30,000, which is too expensive for most small and medium-sized enterprises. But DigitalOcean can provide access to the technology through its Paperspace platform, making it more likely that small and medium-sized businesses will switch to the company.
This value proposition could help revenue reach $693 million in 2023, a 20% increase from 2022. Thanks to efforts to limit operating expense growth, DigitalOcean turned a profit, with a net profit of $19 million; last year it lost $28 million.
The stock’s performance suggests some uncertainty. Shares are up just 15% from last year, but still trade at a 70% discount to their 2021 highs. In addition, the company has recently undergone top-level changes, naming Paddy Srinivasan as its new CEO in February.
Srinivasan has extensive leadership experience in the industry, most recently at software-as-a-service company GoTo and several other technology companies, and his leadership could reinvigorate DigitalOcean.
Its forward price-to-earnings (P/E) ratio is 24, making it cheap by any measure. As more businesses turn to the cloud and artificial intelligence, DigitalOcean appears poised to serve a wide range of small and medium-sized businesses, which could ultimately send its stock price significantly higher.
2. Nu Holdings
Now holding (no -0.17%) Running one of the largest digital banks in the world, you’d be forgiven for overlooking it.Although Warren Buffett Berkshire Hathaway As an early investor, it’s easy to overlook Nu Holdings, which only operates in Brazil, Mexico, and Colombia.
Those who follow the company may also miss its value proposition. Unlike the United States, Latin America is a region with few traditional banks. This leaves many people unable to obtain bank accounts or credit cards.
The company’s Nubank changed that, giving millions of Brazilians their first credit card. Since most Latin Americans own smartphones, banks can interact with customers without maintaining physical branches.
This approach has been very successful in Brazil, with 88 million customers (53% of the country’s adult population) having at least one Nu account. Additionally, as the Brazilian market became saturated, the bank has expanded into Mexico and Colombia, where it has a combined customer base of approximately 6 million. Early signs of success in these countries suggest Nu’s rapid expansion could continue for several years.
These increases lead to revenue reaching $8 billion in 2023, up 68% from a year ago. Nu Holdings recently turned a profit for the year, hitting a net profit of $1 billion after a loss of $365 million in 2022.
Investors have begun to take notice of the stock, which is up more than 180% over the last year.
Nu Holdings is also priced attractively for new investors. At a price-to-earnings ratio of 58 times and a forward price-to-earnings ratio of 31 times, the stock is not expensive considering its rapid growth. Until more investors discover this fintech stock, this P/E ratio could be a good time to buy.
John Mackey is the former CEO of Amazon subsidiary Whole Foods Market and a board member of The Motley Fool. Will Healy works at Berkshire Hathaway, DigitalOcean and Nu. The Motley Fool holds and recommends Amazon, Berkshire Hathaway, DigitalOcean, Microsoft and Nvidia. The Motley Fool recommends Nu and recommends the following options: long $395 Microsoft January 2026 calls and short $405 Microsoft January 2026 calls. The Motley Fool has a disclosure policy.
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