2 Stocks That Could Double Within 3 Years
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Wall Street doesn't always get it right. Companies with excellent growth prospects can be significantly undervalued, leading to stellar returns for patient investors. What follows are two stocks that could double your money in just a few years.
1. Opendoor Technologies
Opendoor Technologies (NASDAQ: OPEN) is disrupting the homebuying process. Its digital platform removes the friction and hassle of buying a home, and while it has experienced growth in recent years, the stock has fallen over a weak housing market. The sell-off is a great buying opportunity ahead of a recovery, where it faces a massive opportunity. The value of all residential real estate transactions in the U.S. was $2.9 trillion in 2023, according to Statista, but is projected to increase to nearly $3.3 trillion by 2028.
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Opendoor generates revenue by acquiring and reselling homes, in addition to insurance, escrow, and brokerage services. This model can generate explosive growth in a strong housing market but the opposite during weak market conditions. Its second-quarter revenue was down 24% year over year to $1.5 billion. However, in the same quarter of 2022, its revenue soared 254% year over year to $4.2 billion, which shows the company's potential.
Third-quarter revenue is expected to be down again to between $1.2 billion and $1.3 billion, but these numbers are baked into the share price. The stock's price-to-sales (P/S) ratio has increased 78% over the last year and remained stable, between 0.25 and 0.40, in recent months. This signals that investors are pricing in a bottom of the housing cycle and waiting for a recovery.
Still, there are risks. Opendoor is not a profitable business right now, with a trailing-12-month net loss of $398 million. It also has $2.4 billion in debt, offsetting $809 million of cash assets on its balance sheet. The company needs to see a recovery in the housing market to shore up its financials.
The good news is that a recovery could be around the corner after the Federal Reserve's recent rate cut, which could lead to improving mortgage affordability. With a more stable housing market probably not too far off, the stock could double in the next few years if the stock returns to a P/S ratio over 0.50, on top of higher revenue.
2. Dutch Bros
Dutch Bros (NYSE: BROS) continues to trade at a reasonable valuation for a fast-growing beverage chain. It started as a coffee shop in the 1990s but has expanded its menu to include energy drinks, shakes, lemonade, sparkling sodas, and more. With the company profitably expanding its stores to maintain high-double-digit revenue growth, the stock could potentially double within three years.