Many “memes actions,” which have been aggressively promoted on social media platforms like Reddit, have skyrocketed this year. Some of these stocks have strong fundamentals, while others, like GameStop and AMC Entertainment Holdings – fully support the hype and short cuts.
It’s tempting to chase those high-flying stocks, but it’s smarter to ignore the noise and buy a few high-quality growth stocks that will continue to recover after the rallies in meme stocks end. Magnite (NASDAQ: MGNI), buzz (NASDAQ: BMBL), and Limited sea (NYSE: SE) may be worth considering.
Magnite, the world’s largest independent advertising technology company, was formed by the merger of Rubicon Project and Telaria last April.
Magnite’s Sell-Side Platform (SSP) enables publishers and digital media owners to manage and sell their own ad inventory. It stands at the opposite end of the ad supply chain of demand side platforms (DSPs) like The trade office, which allows advertisers and media buyers to place auctions on these advertising inventories.
Digital advertising companies like AlphabetGoogle provides both SSP and DSP services, but Magnite is a popular choice for publishers who want to sell their ads beyond the Google ecosystem.
Magnite serves ads on desktop and mobile platforms, but smart TV devices are its fastest growing market. He recently acquired the SpotX video advertising company to expand this business.
Magnite’s revenue grew 42% to $ 221.6 million in 2020, while its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 68% to $ 43.1 million. Analysts expect its revenue to grow 79% this year thanks to the integration of SpotX, then grow 30% next year.
Ultimately, they expect Magnite’s adjusted earnings to triple this year and increase by 42% next year. Those are amazing growth rates for a stock that is trading at 37 times forward earnings and 10 times sales this year.
Bumble, the online dating company that lets users take the first step on its main app, went public in February. He also owns Badoo, an older dating app popular in Europe and Latin America.
Bumble’s revenue grew 19% last year, even as the pandemic dampened growth in the number of paid users, and its adjusted EBITDA rose 50%.
Bumble’s growth accelerated as the pandemic passed. In the first quarter of 2021, its revenue jumped 43% year-on-year, its adjusted EBITDA more than doubled and the number of paid users increased 30% to 2.8 million, of which 1.35 million Bumble users and 1.45 million Badoo users.
This year, Bumble expects its revenue to grow 34% to 35% and Adjusted EBITDA to grow 24% to 27%, which represents impressive growth rates for a trading stock. to 12 times this year’s sales. By comparison, Tinder’s parent company Match group is trading at 13 times this year’s sales, but analysts expect its revenue to grow only 20% this year.
Critics often claim that Bumble will fight against Match’s wider range of dating apps. But Bumble is also gradually expanding its own ecosystem – with Bumble BFF for platonic friendships and Bumble Bizz for business relationships – and it hasn’t even started monetizing those features yet.
3. Limited sea
Sea is a Singapore-based e-commerce and games company. Its online marketplace, Shopee, is the leader in e-commerce in Southeast Asia and Taiwan, and its games division Garena produces Free fire, an incredibly popular battle royale game in Southeast Asia and Latin America.
Sea’s revenue soared 101% to $ 4.4 billion last year, with its e-commerce and digital entertainment (games) revenue increasing by 160% and 78% respectively. Analysts expect its revenue to grow another 90% this year. Sea shares may seem expensive at 17 times this year’s sales, but many other slower-growing companies are trading at much higher price-to-sell ratios.
Sea is still not profitable under generally accepted accounting principles (GAAP), but it posted adjusted EBITDA of $ 107 million last year, compared to a loss of $ 179 million in 2019.
Its adjusted EBITDA improved for two main reasons. First, Shopee has reduced its losses per order by offering fewer promotions and subsidies. Second, Free fire continued to gain paying users, which helped Garena to generate positive Adjusted EBITDA and offset Shopee’s losses.
It’s a delicate balance, as Sea relies essentially on a single blockbuster game to support its unprofitable e-commerce platform. I do think, however, that both companies could still have a lot of room to grow.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.