Startups are some of the riskiest businesses to invest in. The vast majority fail in their first few years. But there is also a compelling argument in favor of startup companies – the fact that they can deliver significant returns if they do become successful. Startup companies can be the best investments to make if you know which ones to chase.
Of course, no one knows for sure which startups will become the next unicorn. Predicting market trends and consumer behavior years in advance is enormously difficult. However, we can make some well-educated guesses and throw a small part of our portfolios into a handful of promising startups. If even one succeeds in a big way, that small position could turn into a very large one over time.
The key is to be prudent. Investing in high-quality startups should also mean that you make a positive return regardless of outlier outcomes. Here are three to look into:
Sezzle (SEZL)
Sezzle Inc. (NASDAQ:SEZL) offers a unique payment platform that allows shoppers to split purchases into four installments paid over six weeks. Customers need only pay the first installment upfront at checkout, making higher-ticket items more affordable. Since going public in August, Sezzle’s stock has been extremely volatile – declining over 90% before rocketing up 284% in the last two months to current levels around $31.
Massive swings aside, I believe Sezzle has serious growth potential as buy now, pay later becomes more mainstream. The company’s 3-year revenue growth rate stands at a brisk 60%, better than 90% of industry peers. Profitability is also looking healthier following Sezzle’s push into monthly financing options. While the price-to-earnings ratio appears elevated at first glance, it falls in line with fintech averages if you exclude one-off items.
As interest rates decline and credit access grows, Sezzle should see heightened demand. Its diverse product suite uniquely positions the company to capture both impulse shoppers and those seeking financing for big-ticket purchases. Though past results are no guarantee, Sezzle has topped earnings expectations in recent quarters. Its focus on strategic partnerships and geographic expansion bodes well for the future. In my view, more upside could be on tap for early investors as this next-gen lender enters its next stage of growth.
Captivision (CAPT)
Captivision (NASDAQ:CAPT) manufactures transparent LED display glass known as G-Glass. This integrated product has all the clarity of glass but can also display digital imagery. G-Glass panels essentially function as see-through digital screens, allowing dynamic content while retaining high transparency.
Since going public in November, Captivision’s share price has skyrocketed over 240%. But at a market cap just above $160 million, I believe this innovative company remains an attractive opportunity. Captivision’s G-Glass technology has applications across industries wherever glass is utilized – think office towers, museums, stadiums, smart homes, and more.
G-Glass stands out from competing transparent display products with best-in-class 99.7% transparency, dual-sided LED content, and durable construction-grade reliability. Captivision also holds patents covering G-Glass production methods and transparent LED configurations. As demand for engaging and customizable architectural displays heats up globally, the firm is poised to capitalize via strategic partnerships and international expansion.
Risks do exist, but given its small size, I think Captivision offers exposure to a lot of upside over the next decade. For investors with risk tolerance, buying shares early on could generate significant returns once market adoption accelerates.
SharkNinja (SN)
SharkNinja (NYSE:SN) went public just last July, yet shares have already surged over 85%. This consumer products juggernaut designs and markets highly-rated kitchenware, cleaning tools, personal care items, and other lifestyle solutions. Brands under the SharkNinja umbrella include Shark vacuums, Ninja blenders, and air fryers.
In its most recent earnings release, the company beat expectations on both the top and bottom lines. EPS exceeded forecasts by nearly 17% while sales grew 6.5% year-over-year. Consensus estimates call for steady 6-15% annual EPS growth and around 7% annual revenue growth moving forward. If achieved, these targets would likely support additional upside for the stock.
Trading at 15 times the expected 2024 earnings, I don’t believe SharkNinja’s valuation fully reflects the firm’s dominant positioning and consistent execution.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.