Of course, it’s impossible to predict what will happen with the market this year. However, by identifying great businesses that are outperforming their competitors, you’ll enhance your chances of outperforming the market’s returns.
Due to this, investors should consider the financial aspects of Roku (NASDAQ: ROKU), DocuSign (NASDAQ: DOCU), and Square (NYSE: SQ) at this time. Here’s why they could be this year’s biggest winners for investors.
Roku: Riding strong tailwinds of profanity
Not too long ago, when people first heard of Roku, they immediately thought of the company’s streaming dongles and flatly rejected it as an investment strategy. However, tons has changed remarkably recently.
The streaming gadgets, which Roku sells approximately at cost, are still far from being finished. The majority of the company’s revenue comes from the platform’s pervasive digital advertising. For each advertiser-supported streaming provider that lists their service on Roku’s platform, Roku negotiates a small portion of the ad house. You might be surprised to learn that it contains quite 10,000 channels, generating a sizable amount of advertising revenue.
Not only that. Additionally, Roku’s roll offers a sizable and expanding selection of subscription streaming services. Every new subscriber that signs up via Roku’s service earns a commission for the corporation. Additionally, the business bargains with some suppliers for the right to promote premium content on The Roku Channel, the business’s own streaming video channel.
Roku is presently the clear market leader for streaming platforms in terms of users. Roku quickly overtook Amazon’s (NASDAQ: AMZN) Fire TV, which had fifty million subscribers by 2020, with 51.2 million. Even more significantly, Roku’s growth is quick—increasing 30.8 percent year over year—while Amazon’s is sluggish, at just 20.5 percent.
With 58.7 billion hours of projected streaming time in 2020, Roku’s highly engaged user base consumes content at a rate of 3 hours each day.
Advertising companies looking to make up for the typical broadcast and cable consumers lost to cord-cutting are becoming more and more dependent on this big and expanding pool of active users. In 2019, the cable TV industry lost approximately five million viewers, and things definitely got worse in 2020. Additionally, it represented the biggest year-over-year loss in pay-TV history.
Additionally, Roku has a superpower. A linked TV operating system (OS) that the company built from the ground up is so well-liked by television manufacturers that it may soon become standard practice.
With these TVs with the Roku brand accounting for respectively 30.8 and 30.1 percent of the market, the Roku OS is already the leading commercial connected-TV OS in both the United States and Canada.
The platform segment of Roku, which is made up of ad income, the Roku Channel, and OS licensing, increased by 748 percent year over year during the most recent quarter while total revenue increased by 743 percent.
In 2020, Roku’s stock increased 148%. However, considering the consumers moving away from broadcast and cable TV, the increasing use of streaming video, and Roku’s dominance in the connected TV market, it’s not unreasonable to believe that Roku can increase by another double over the upcoming year.
DocuSign: Attracting new clients is essential for expansion
The company has added value to 38,000 enterprise and commercial customers over the past 3 quarters, boosting its base of gigantic customers by a whopping 500th. The fact that these new customers are only beginning their DocuSign journey toward digital transformation is encouraging for investors.
When new clients sign up with this e-signature expert, they’re often focused on a small number of organizational pain points were doing away with pen and paper signatures can yield the biggest savings. However, usage grows as soon as workers realize how much time e-signature may save.
Many people can produce a large number of digital signatures over time in more business-related sectors. The second icon in the graphic below, labelled “drive adoption,” diagrams this growth. Customers use electronic signatures more frequently than is typically the case, which contributes significantly to the 122% dollar-based retention rate from the most recent quarter.
Long-time DocuSign users are typically considering how to handle all of the new digital agreements. Although there isn’t a centralized mechanism to create, act upon, and manage the proliferation of contracts, the way in which those documents are often dominated is frequently incredibly inefficient.
The Agreement Cloud, which enables end-to-end digital management of your agreement method, is also available for customers to upgrade to at that time. Even artificial intelligence-driven search and potent analytics tools are part of this range of capabilities.
Once companies sign up for Agreement Cloud, there is a lot of opportunity to increase the utilization cases and user base of this comprehensive suite of products, much like the e-signature adoption cycle. The third and fourth icons in the graphic above, labelled “Optimize use case(s)” and “Discover new prospects,” respectively, diagrammatically represent these two growth phases.
Could DocuSign’s stock rise within the next year with the benefits of the most recent customers using sign language? Potential exists. The most recent quarter had strong year-over-year revenue growth of 53 and billings (the cost of all remaining time on open contracts) of 63. the business forecasted growth to be at least forty percent for the quarter ending on December 31, 2021.
But given management’s track record of outperforming its own guidance, I wouldn’t be surprised to see another quarter of 50%+ revenue growth. More clients than ever are finding creative new ways to use DocuSign’s product line. Investors should start 2022 happy knowing that they own shares of this great operator, even if the stock does not double in 2021.
Square: This business cannot be confined in any way
The bright white payment terminals used by the coolest low outlets (as well as many uncool low outlets) and several alternative small businesses may be Square’s greatest claim to fame.
Although Square’s payment terminals have become a vital tool for many merchants, the payment platform that they run on is really the company’s secret weapon.
As some firms failed as a result of the pandemic last year, the company put their payment technology to the test. In the third quarter, the company saw a pure gold growth in card-not-present gross payment volume (payments made through the company’s online channels) as opposed to reeling from the shutdowns, and profit surged by $59.9 compared to the quarter before.
Additionally, Square is benefiting from a mostly ongoing trend toward cashless, electronic payments. With thirty million monthly active users and a 212% rise in profit over the prior quarter, the company’s money App allows users to pay merchants and other users.
The good news for potential square investors is that the company is just starting to tap into the substantial digital payments market, which is expected to be worth $2 trillion by 2025.
Sq. appears to be a solid investment for investors looking for a fantastic company with the ability to double their money as it expands into its digital payment industry opportunity.