HomeBusiness2 Top Tech Stocks That Could Make You a Millionaire

2 Top Tech Stocks That Could Make You a Millionaire

A common hope for growth investors is to find the stocks that will make them millionaires with a small investment. Technology stocks like Amazon And Microsoft have achieved such feats for long-term investors.

But as these companies have matured and grown more slowly, the goal is to find the next Microsoft. The following two small businesses have growth prospects that could translate into making millionaires.

1. DigitalOcean

DigitalOcean (NYSE: DOCN) may not look like a millionaire maker at first glance. It’s one of many cloud infrastructure providers, and with competitors like Amazon and Microsoft, you might wonder how it can compete with a market cap of less than $4 billion.

DigitalOcean primarily serves small and medium-sized businesses (SMBs), which account for 33 million businesses in the U.S. alone, according to the Small Business Administration. To that end, the company has developed a business model that the larger players cannot compete against without undermining their own businesses.

First, it has transparent pricing, meaning businesses simply buy the services they need. Second, it provides the DigitalOcean Community with a combination of educational materials and access to other users that allow small businesses to solve IT-related problems without expensive staff.

Moreover, the advent of generative artificial intelligence (AI) is likely to increase the demand for its services. Nvidia H100 AI chips can cost around $30,000 each, too expensive for most SMBs. But DigitalOcean can provide access to this technology through its Paperspace platform, making it more likely that SMBs will turn to the company.

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This value proposition likely helped push 2023 revenue to $693 million, up 20% from 2022. And thanks to efforts to limit operating cost growth, DigitalOcean turned a profit, earning $19 million in net revenue; it lost $28 million last year.

The stock’s behavior indicates some uncertainty. Shares are up just 15% in the past year and are still selling at a 70% discount to their 2021 high. Additionally, the company has recently undergone changes at the top, with Paddy Srinivasan appointed as new CEO.

Srinivasan has extensive industry leadership experience, most recently at software-as-a-service company GoTo and several other technology companies, and his leadership could revitalize DigitalOcean.

Its price-to-earnings ratio (P/E) is 24, making it cheap in almost every respect. As more enterprises turn to cloud and AI, DigitalOcean appears well-positioned to serve its massive SMB base, which could ultimately make its stock price much bigger.

2. Now Holdings

Now Holdings (NYSE: NOW) operates one of the largest digital banks in the world, but you could be forgiven for overlooking this. While Warren Buffett’s Berkshire Hathaway was an early investor and only operates in Brazil, Mexico and Colombia, making Nu Holdings easy to miss.

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Those who notice the company may also miss the value proposition. Unlike the US, Latin America is a region with few traditional banks. As a result, a large part of the population was unable to obtain a bank account or credit card.

The company’s Nubank has changed that, giving millions of Brazilians their first credit card. And since most Latin Americans have smartphones, the bank can communicate with customers without having to maintain physical branches.

This approach has been so successful in Brazil that 88 million customers, or 53% of the country’s adult population, have at least one Nu account. Now that the bank has saturated the market in Brazil, it has also expanded into Mexico and Colombia, which together represent approximately 6 million customers. The first signs of success in these countries indicate that Nu’s rapid expansion could continue for years to come.

These increases led to revenues of $8 billion in 2023, up 68% from a year ago. And Nu Holdings recently turned profitable on an annual basis, earning $1 billion in net income after posting a $365 million loss in 2022.

Investors are starting to take notice and the stock is up more than 180% in the past year.

Nu Holdings is also attractively priced for new investors. With a price-to-earnings ratio of 58 and a forward price-to-earnings ratio of 31, the stock is cheap given its rapid growth. This earnings multiple, now could be a good time to buy before more investors discover this fintech stock.

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Should You Invest $1,000 in DigitalOcean Now?

Before you buy shares in DigitalOcean, consider the following:

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Will Healy holds positions at Berkshire Hathaway, DigitalOcean and Nu. The Motley Fool holds positions in and recommends Amazon, Berkshire Hathaway, DigitalOcean, Microsoft, and Nvidia. The Motley Fool Recommends Now and recommends the following options: long January 2026 $395 calls at Microsoft and short January 2026 $405 calls at Microsoft. The Motley Fool has a disclosure policy.

2 Top Tech Stocks That Can Make You a Millionaire was originally published by The Motley Fool

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