It’s understandable why investors looking for a high-growth stock to buy might consider Nvidia (NASDAQ: NVDA). The AI chipmaker grew its revenue from $10.9bn in FY20 to $60.9bn in FY24.
The top line could surpass $120bn this year (FY25). That would represent a five-year compound annual growth rate (CAGR) of approximately 61%!
However, Nvidia’s market cap is now in excess of $3.1trn and the price-to-sales (P/S) ratio is very high at 40. In other words, the market has caught up with events.
Moreover, the company’s four largest customers — widely thought to be Microsoft, Meta Platforms, Amazon, and Alphabet — account for around 40% of total revenue, according to Bloomberg.
On the one hand, this crème de la crème of the tech world indicates how world-class Nvidia’s products are. On the other, it reveals a high level of customer concentration, especially when these firms are all developing their own AI chips to reduce reliance on those from Nvidia.
Still growing
In contrast, Uber Technologies (NYSE: UBER) doesn’t have this problem. At the end of June, it had a record 156m monthly platform customers!
Despite this enormous scale, the company continues to expand its reach. This year, it launched in Luxembourg and re-entered Hungary after an eight-year absence.
The company is also expanding into new areas in existing countries. For example, it’s experiencing rapid growth in Brazil, while in the UK it recently launched in Hull, Northampton, York, Teesside, and Aberdeen.
Management estimates that in its top 10 countries, the monthly penetration rate among customers is still less than 20%. So there appears lots of room to grow, even in more mature markets.
Then there’s an huge untapped digital advertising opportunity. Management is looking to Amazon for what’s possible here (the retail firm’s advertising business has grown enormously in recent years).
Expanding into adjacent areas like advertising, subscription services (Uber One), and even train ticket bookings, shows how Uber is enhancing its optionality (a key trait of winning stocks).
Valuation
The P/S ratio is 3.9, which is around its historic median (and far cheaper than Nvidia).
Meanwhile, the forward P/E ratio might look pricey at 33, but the firm is projected to increase its earnings per share at a compound annual rate of 52% between 2023 and 2026.
Autonomous vehicles
Now, Uber does faces competition from local taxi firms and DoorDash, as well as feet, buses, bikes, scooters, and skateboards. There are plenty of ways to get about.
Plus, Tesla’s long-overdue robo-taxi network might be a risk. That said, Uber already has autonomous vehicles (AVs) available on its app in some US cities. Last quarter, it recorded a sixfold increase in AV rides.
Meanwhile, it has partnerships with all the leading AV players:
Waymo
Cruise
BYD
Aurora Innovation
Joby Aviation (a flying electric taxi firm working on autonomy)
I’m investing
Of the 52 analysts rating the stock in the last three months, an incredible 46 have it down as either a ‘buy’ or ‘strong buy’ (overwhelmingly, the latter).
Uber has built an incredible brand and powerful competitive advantage based on network effects (the platform’s value increases as more users join). And it’s quickly turning into a profit-making machine.
This is an exciting high-growth stock that I plan to buy very soon.
The post 1 super growth stock I’d like to buy before Nvidia! appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
More reading
If I’d bought 1 share of Nvidia stock in 1999, here’s how much I’d have now
Up 65% in a year, this is one of my top growth stocks for the next decade
Billionaires are gobbling up this hot growth stock — and I want it in my ISA!
After a 17% dip, is now a golden opportunity for me to buy Nvidia stock?
8 shares that Fools have been buying!
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ben McPoland has positions in Joby Aviation. The Motley Fool UK has recommended Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Uber Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
