Investing is about putting money to work now that you hope will be worth more later. It’s fine to dream big – for example, a fivefold increase in six years – but you have to choose the right stocks.
Which stocks can turn $1,000 today into $5,000 in 2030? Two names I like are Carnival (NYSE: CCL) And Roku (NASDAQ: ROKU). Let’s take a closer look at that.
1. Carnival
You might think it’s a strange bet that the world’s largest cruise line will be a five-bagger by 2030, but there are a few factors that could see its stock prices rise in the coming years. Let’s start with leverage. Cruise lines incurred a lot of additional debt during the pandemic-related shutdown in 2020, which lasted well into 2021.
Leverage is not usually positive, but let’s elaborate. Carnival’s market capitalization is $20 billion. Its debt-saddled enterprise value is almost $50 billion. A fivefold increase in Carnival’s market capitalization to $100 billion would result in its enterprise value – all things being equal – less than tripling to $130 billion. Reality may be kinder if Carnival uses its newfound profitability to pay down its debt and buy back its stock. Last year alone, the country spent $4 billion to pay off its debt. However, based on today’s starting position, the point here is that Carnival’s enterprise value should increase by only 160% over six years.
As for Carnival’s business, it’s doing a lot better than you probably think. Carnival has booked a record high for future sailings, meaning passenger demand and what customers are willing to pay to cruise in the near future have never been higher. Some naysayers believed the cruise industry would never be the same after the worst of the pandemic, but Carnival posted record revenue for its first fiscal quarter earlier this year.
The near-term prospects are encouraging and the valuation is compelling. Carnival is trading at a reasonable price of 16 times what analysts expect it to earn this fiscal year (which ends in November). The multiple drops to 11 when we look to next year. If we go all the way to 2030 – something that’s not really recommended, but necessary to play out this six-year scenario – analysts see Carnival earning $3.25 per share. This is less than five times what the shares are now. It’s also a market cap-to-earnings ratio of less than 25 if the stock has increased fivefold, a premium but realistic valuation.
It can even be cheaper. Carnival has consistently topped Wall Street’s profit targets over the past year and has made changes including double-digit percentage gains in its last three financial reports. With the world’s largest fleet of ships in various price ranges, Carnival is well suited to sail through the inevitable waves that will rise and fall over the next six years. The future looks bright for cruise line stocks in general and Carnival in particular.
2. Roku
Next we have Roku. Let’s start at the starting line, like we did for Carnival. Roku shares closed Thursday at $53.65. Three summers ago, it traded at $490.76. The number of shares is slightly higher and long-term non-lease debt is lower. So if Roku grows fivefold, to roughly $268 in six years, it would still be a little more than halfway to its peak.
Why is Roku out of favor? It’s not revenue growth. Turnover has almost doubled in the past three years. It’s not the popularity of the platform, as the 81.6 million households that use the platform to stream digital content on their TVs have never been as engaged as they are today.
There are some competitive threats and monetization challenges, but these should be temporary. Roku has been able to grow despite competing for years with some of the nation’s wealthiest consumer tech companies. The fear of short-term competition seems exaggerated. It may take some time for recent losses and stagnant average revenue per user to turn positive, but that’s the beauty of this six-year timeline to get back on track in a niche that will only become more important over time .
Do you need to invest $1,000 in Carnival Corp. now? to invest?
Consider the following before buying shares in Carnival Corp. buys:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Carnival Corp. wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $801,365!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
Rick Munarriz has positions in Roku. The Motley Fool holds and recommends positions in Roku. The Motley Fool recommends Carnival Corp. On. The Motley Fool has a disclosure policy.
Two stocks that could turn $1,000 into $5,000 by 2030 were originally published by The Motley Fool
