Two Technology Stocks with Potential to Turn You into a Millionaire

Two Technology Stocks with Potential to Turn You into a Millionaire

One of the common hopes of growth investors is to find the stock that will make them millionaires with a small investment. Tech stocks like Amazon And Microsoft have accomplished 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 millionaire-making potential.

1. Digital ocean

Digital Ocean (NYSE:DOCN) might not look like a millionaire designer at first glance. It’s one of many cloud infrastructure providers, and with competitors like Amazon and Microsoft, you might be wondering how it can compete with another cloud infrastructure provider. market capitalization less than $4 billion.

DigitalOcean primarily serves small and medium-sized businesses (SMBs), which represent 33 million businesses in the United States alone, according to the Small Business Administration. To this end, the company has developed a business model that the big players cannot compete against without harming their own businesses.

On the one hand, its pricing is transparent, meaning businesses simply purchase the services they need. Second, it provides the DigitalOcean community with a combination of educational materials and access to its other users that can help small businesses solve IT problems without expensive staff.

Additionally, the advent of generative artificial intelligence (AI) will likely fuel demand for its services. Nvidia H100 AI chips can cost around $30,000 a piece, which is too expensive for most SMBs. But DigitalOcean can offer access to this technology through its Paperspace platform, making it more likely that SMEs will turn to the enterprise.

This value proposition probably helped income in 2023, reaching $693 million, 20% more than in 2022. And thanks to efforts to limit the growth of operating expenses, DigitalOcean turned a profit, earning $19 million in net profit; it lost $28 million the year before.

The stock’s behavior suggests some uncertainty. Shares are up just 15% over the last year and are still selling at a 70% discount from their 2021 high. Additionally, the company recently underwent changes at the top, appointing Paddy Srinivasan as the new CEO in February.

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

Its forward price-to-earnings (P/E) ratio is 24, making it inexpensive by just about any measure. As more companies turn to the cloud and AI, DigitalOcean appears well-positioned to serve the massive SMB base, which could eventually drive its stock much higher.

2. Nu Holdings

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

Those who notice the company may also miss its value proposition. Unlike the United States, Latin America is a region with few traditional banks. This has left a large portion of the population unable to obtain a bank account or credit card.

The company’s Nubank was a game changer, giving millions of Brazilians their first credit card. And since most Latin Americans own a smartphone, the bank can interact 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. Additionally, as the bank saturates the market in Brazil, it has expanded into Mexico and Colombia, which together represent around 6 million customers. Early signs of success in these countries indicate that Nu’s rapid expansion could continue for years.

These increases generated $8 billion in revenue in 2023, a 68% increase from last year. And Nu Holdings recently became profitable on an annual basis, earning $1 billion in net profit after losing $365 million in 2022.

Investors have started to take notice, and the stock is up more than 180% in the past year.

Nu Holdings also offers an attractive price for new investors. With a P/E of 58 and a forward P/E of 31, the stock is cheap given its rapid growth. This earnings multiple could be a good time to buy before more investors discover this fintech stock.

Should you invest $1,000 in DigitalOcean right now?

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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 and recommends Amazon, Berkshire Hathaway, DigitalOcean, Microsoft and Nvidia. The Motley Fool recommends Nu and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

2 Cutting-Edge Tech Stocks That Could Make You a Millionaire was originally published by The Motley Fool

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