In the past year, a notable increase in the value of numerous cryptocurrencies has been observed, fuelled by a growing optimism regarding softer macroeconomic challenges and a potential decrease in interest rates, prompting investors to return to riskier assets. Despite their increasing popularity, cryptocurrencies remain highly volatile and challenging to assess regarding value accurately.
For those seeking bolder investment opportunities without venturing into the realm of cryptocurrencies, high-growth tech stocks linked to sustainable businesses present a compelling alternative. Three high-growth companies stand out as having significant potential for expansion in the coming years: Reddit, Rocket Lab USA and Innodata. These firms may surpass the growth prospects of any cryptocurrency during this period.
Reddit is a unique platform combining elements of news aggregation, discussion, and social media functionalities. Between late 2021 and the third quarter of 2024, the total count of daily active unique users surged from 53.9 million to 97.2 million. The growth can be attributed to a series of political events, significant news stories, and the release of new films and games.
Reddit reported a 21% increase in revenue for 2023, reaching $804 million. The company’s adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) also showed improvement, moving from a loss of $109 million to a loss of $69 million. In 2024, the company anticipates a revenue increase of 56% to 58%, reaching nearly $1.3 billion, alongside a positive adjusted EBITDA projected between $254 million and $269 million.
Recent news events are expected to fuel that growth, alongside the platform’s effective conversion of logged-out visitors into logged-in users, facilitating easier monetisation through advertisements. Additionally, partnerships with Alphabet’s Google search engine and OpenAI’s ChatGPT will likely play a significant role. The potential for these connections to attract an increased user base to the platform is substantial.
Reddit’s enterprise value stands at $30 billion, raising eyebrows as it trades at 23 times this year’s sales and an astonishing 115 times its adjusted EBITDA. However, the company’s swift expansion, distinct competitive edges, and increasing profits may warrant those elevated valuations.
Rocket Lab USA
Rocket Lab manufactures partially reusable rockets catering to major clients such as NASA and the U.S. Space Force. The flagship Electron orbital rocket has successfully launched, demonstrating its capability to carry up to 300 kilogrammes. This marks the 58th successful launch over the past seven years. The upcoming Neutron rocket is set to transport a payload of up to 15 metric tonnes during its launch later this year.
In 2023, the company’s revenue experienced a modest increase of 16%. However, analysts project a significant jump of 77%, anticipating reaching $434 million in 2024. In the first nine months of the year, the company successfully launched 12 additional rockets, concluding the third quarter with a substantial backlog of $1.05 billion.
Rocket Lab is projected to remain unprofitable for the next several years, with an enterprise value of $15 billion, approximately 35 times greater than its anticipated sales for 2024. There is potential for the company to expand its operations significantly in the coming decade as it secures a more extensive customer base. If that occurs, the stock may align with its inflated valuations and rise even further.
Innodata
In artificial intelligence, major cloud companies are dedicating a significant portion of their efforts—approximately 80%—to data preparation. In comparison, only 20% is allocated to the actual training of algorithms. This represents a significant misallocation of time and resources for companies engaged in extensive data analysis.
Innodata, once recognised as a slow-growth IT software and services provider, introduced a suite of task-specific microservices in 2018 aimed at addressing challenges in artificial intelligence (AI). Five of the prominent companies known as the “Magnificent Seven” have begun implementing microservices to refine their AI-centric data. As a result, Innodata has experienced a consistent compound annual growth rate (CAGR) of 12% from 2019 to 2023.
Analysts project that Innodata will see a significant revenue increase in 2024, anticipating an 89% rise to $164 million, driven by the company’s expanded data processing for major AI clients. The company expects a net profit of $23 million for the year, a significant turnaround from its net loss of $0.9 million in 2023.
Innodata, boasting an enterprise value of $1.3 billion, maintains a reasonable valuation, trading under 8 times its projected sales for the year and 61 times its anticipated earnings. The potential for significant growth looms as the generative AI market is poised to expand in the coming years.