2 growth stocks that could beat the market over the next 10 years


Really big companies that transform an entire industry can deliver years of phenomenal returns…if you can find them. Lending is one of society’s oldest industries, where commodities like credit scores and credit cards ruled for years. The next two stocks have a lot to prove, but they could offer years of market upside if they succeed in changing the way consumers borrow.

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Smarter loan decisions

Assets received (UPST 3.60%) uses artificial intelligence to make credit decisions. the FICO Credit score is the traditional measure of a consumer’s creditworthiness, but Upstart claims its AI can reduce defaults by 75% while approving borrowers at the same rate. The company started with unsecured personal loans, but recently launched auto loans, with business loans and small dollars imminent, and mortgages still ahead of Upstart’s future growth plans.

The company derives most of its revenue from fees generated when its lending partners issue an Upstart loan. Upstart had just 10 banking partners when the company went public in late 2020, but had 57 in the company’s quarter ending March 31, 2022. Additionally, 11 of them don’t now have no minimum FICO requirements for borrowers, a sign of confidence that Upstart’s technology is working as intended.

Investors recently punished Upstart for lowering its 2022 revenue forecast when it reported its first quarter 2022 results, but the long-term outlook looks bright. More than 10,000 banks and credit unions operate in the United States. As long as lenders continue to partner with Upstart, it has ample room for expansion, especially as it moves into new lending categories.

The stock now has a market capitalization of just $4 billion, including just under $1 billion in cash! Meanwhile, Upstart still expects 47% revenue growth in 2022, guiding $1.25 billion. The company is also profitable, generating a net profit of $158 million over the past year. A recession could impact corporate results, so investors should expect some volatility. However, the long-term upside looks compelling if Upstart’s business continues to thrive over the next few years.

Cancellation of credit cards

Affirm Assets (AFRM -3.13%) is a Buy Now, Pay Later company that uses AI to make lending decisions, often at a consumer’s point of sale. It tries to replace credit cards by offering more consumer-friendly loan terms. For example, Affirm does not charge late fees and often offers 0% interest rates for certain purchases.

The company makes money at the consumer and merchant level; it charges consumers for interest-bearing loans and requires merchants to pay fees such as commissions on transactions Affirm receives. Consumers benefit from user-friendly and flexible payment options. Meanwhile, Affirm says its service increases merchant sales and reduces the need for discounts. It’s a win-win for users and merchants, and Affirm makes money on both sides of the equation.

Affirm has focused heavily on getting its technology to as many users as possible, partnering with e-commerce companies such as Amazon, Shopify, walmart, Targetand Wayfair. Together, these partners cover approximately 60% of the US e-commerce landscape, as well as thousands of smaller merchants and brands. Affirm has 207,000 merchants and 12.7 million users on its platform in the quarter ending March 31, 2022.

Management estimates that the company’s total addressable market will reach $1.5 trillion in trading volume by 2025. Affirm’s volume of $13 billion in the past year indicates a ton of margin of long-term growth.

Like Upstart, the stock fell dramatically from $176 to $14. At its current price of $25, the stock’s market capitalization is just $7 billion. Meanwhile, Affirm is targeting $1.3 billion in revenue for its fiscal year 2022, a 49% jump from 2021. The company will need to show it can handle a recession where consumers are spending less and potentially more by default. , but investors could see huge returns over the long term if things work out.

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