Many cryptocurrencies surged over the past year as expectations for milder macro headwinds and lower interest rates drove investors back toward riskier investments. However, cryptocurrencies are still notoriously volatile and hard to properly value.
So if you're looking for some more daring investments but don't want to take a chance on cryptocurrencies, you should buy some high-growth tech stocks that are tethered to sustainable businesses instead. I believe three high-growth companies in particular -- Reddit (RDDT -0.18%), Rocket Lab USA (RKLB -2.11%), and Innodata (INOD -5.99%) -- might have more growth potential than any cryptocurrency over the next few years.
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The niche social media player: Reddit
Reddit is a platform that blends news aggregation, discussion, and social media features. From the end of 2021 to the third quarter of 2024, its total number of daily active unique users grew from 53.9 million to 97.2 million. A lot of that growth was driven by political events, major news stories, and new movie and game releases.
In 2023, Reddit's revenue rose 21% to $804 million as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved from negative $109 million to negative $69 million. But in 2024, it expects its revenue to grow 56% to 58% to nearly $1.3 billion with a positive adjusted EBITDA of $254 million to $269 million.
That growth will likely be driven by recent news events, its stable conversion of logged-out visitors into logged-in users (which are easier to monetize with ads), and its partnerships with Alphabet's Google search engine and OpenAI's ChatGPT. Those connections could drive even more users to its platform.
With an enterprise value of $30 billion, Reddit might seem pricey at 23 times this year's sales and 115 times its adjusted EBITDA. But its rapid growth, competitive advantages, and rising profits could justify those premium valuations.
A high-growth space stock: Rocket Lab USA
Rocket Lab produces partially reusable rockets for NASA, the U.S. Space Force, and other big customers. It's successfully launched its flagship Electron orbital rocket, which can carry up to 300 kilograms, 58 times over the past seven years. Its next rocket, the Neutron, aims to carry up to 15 metric tons when it launches later this year.
Its revenue only rose 16% in 2023, but analysts expect that figure to surge 77% to $434 million in 2024. It's already launched 12 more rockets in the first nine months of the year, and it ended the third quarter with a backlog of $1.05 billion.
Rocket Lab is expected to stay unprofitable over the next few years, and its enterprise value of $15 billion is nearly 35 times higher than its projected sales for 2024. However, it could scale up its business over the next decade as it locks in more customers. If that happens, its stock could grow into its frothy valuations and soar even higher.
An overlooked AI play: Innodata
As large cloud companies develop new AI applications, they often spend 80% of their time preparing their data and just 20% of their time training their algorithms. That's a waste of time and resources for companies that are crunching lots of data.
Innodata, which was previously known as a slow-growth IT software and services provider, launched a suite of task-specific microservices to resolve those artificial intelligence (AI) issues in 2018. Five of the "Magnificent Seven" companies subsequently started using those microservices to clean up their AI-focused data, and Innodata's sales rose at a steady compound annual growth rate (CAGR) of 12% from 2019 to 2023.
But for 2024, analysts expect Innodata's revenue to rise 89% to $164 million as it processes a lot more data for those big AI customers. They expect it to generate a net profit of $23 million for the year, compared to its net loss of $0.9 million in 2023.
With an enterprise value of $1.3 billion, Innodata still looks reasonably valued at less than 8 times this year's sales and 61 times this year's earnings. It could head a lot higher as the booming generative AI market expands over the next few years.
