If you have a thousand dollars available, consider investing in these two straightforward growth stocks this month:
Over the past couple of years, growth stocks have seen fluctuations across various sectors as investors showed favoritism towards certain businesses, causing stock prices to rise, while others lost their appeal and experienced a fall. The ideal picks for your portfolio should align with your investment objectives and businesses you fully comprehend. It's advisable to hold these valuable additions for at least three to five years.
In case you're seeking two straightforward growth stocks to invest in with a $1,000 budget at present, take a look at these two options that could make up your list of potential prospects.
1. Pinterest
Pinterest (PINS 0.31%) was a hit with investors a few years ago. However, the change in investor sentiment due to a challenging ad spending period put a damper on its performance. Negative comparisons to historical pandemic growth, a genuine decline in overall user growth, and a lack of profitability led to adjustments in user numbers and weak revenue growth.
However, recently, these trends appear to be turning around as Pinterest manages to find its footing in terms of ad spending. While some advertisers are still hesitant to spend, the ad spending landscape is witnessing more favorable conditions compared to previous years. Pinterest generates its revenue through the selling of ad space to businesses, both small and large.
These 'pins' typically direct users to a specific product or service they can purchase. Key factors influencing Pinterest's ability to consistently grow revenue and remain profitable include the overall state of ad spending, the consumer spending environment, and user growth. Pinterest has launched various initiatives to entice more advertiser investments, including AI-driven ad options.
The Performance+ product suite, launched on Oct. 1, combines the platform's AI capabilities with automation to optimize ad campaigns while boosting ad impressions. Early results indicate that Performance+ allows advertisers to achieve a 20% improvement in cost per action. A related offering, Performance+ Creative, allows advertisers to employ AI-generated backgrounds for shopping ads.
Early tests have shown that advertisers who utilize Performance+ Creative enjoy a 14% average increase in conversion rate and a 9% decrease in cost per action for advertisers. A lower cost per action means that advertisers pay less money for a preferred result from a customer, such as a sign-up or purchase.
Pinterest's constant drive to innovate to cater to advertisers and users who shop on its platform is essential to its growth, and it's executing these objectives effectively. In Q3 2024, revenue increased by 18% from the previous year to $898 million. It also reported profits of $31 million, a staggering 354% increase compared to its net income one year ago.
Meanwhile, Pinterest now boasts 537 million monthly active users (MAUs). This figure is up 11% from just one year ago and a 21% increase from two years ago. Additionally, Pinterest has reported operating cash flow of approximately $969 million over the past 12 months. With shares currently trading down by double digits from the start of the year (as of this writing), forward-thinking investors might consider buying on the dip.
2. Spotify
Spotify Technology (SPOT 1.13%) has seen a significant surge in 2024. From January to the time of this article, shares have increased by an impressive 145%. While share price alone doesn't provide much information (other than what investors value it at in a given moment), it is worth considering the factors behind these movements when making a buying decision.
As the largest music streaming platform worldwide, Spotify has a strong presence in a highly lucrative sector, with its addressable market continuing to expand. Management estimates its total addressable market of potential users to exceed 1 billion people, far surpassing its current user base. Furthermore, Spotify targets at least one-quarter of the digital music listening population globally, which is estimated to be between 3 billion and 4 billion individuals.
In summary, Spotify has hardly scraped the surface of its growth potential. As of now, Spotify boasts 640 million MAUs. This figure is up 11% from just one year ago. Of this MAU figure, 242 million are premium subscribers while the other 402 million are ad-supported users.
Spotify generates revenue through various sources, including premium subscription fees for ad-free listening and additional perks, as well as advertising revenue from its free membership tier. In Q3 2024, Spotify earned nearly 4 billion euros in revenue, a 19% increase from the previous year. Premium membership revenue made up 3.5 billion euros of this total, while ad-supported revenue contributed 472 million euros. These figures have increased by 21% and 6%, respectively, from one year ago.
Spotify turned a profit as well, reporting net income of 300 million euros during the three-month period, marking a substantial 362% increase from the same quarter in 2023. While Spotify's valuation has climbed given the stock's surge, investors interested in becoming part-owners of this high-growth business still have the opportunity to benefit from a multi-year investment. An initial investment in Spotify now can be gradually expanded through methods like dollar-cost averaging and yield positive results in the long term.
After analyzing the performance of various growth stocks, investors might consider allocating some money towards Pinterest or Spotify based on their investment objectives and financial capabilities. For instance, Pinterest, with its recent turnaround in ad spending, could be an enticing choice for those seeking a potential profit from a popular platform that generates revenue through ad sales and user engagement. Similarly, investors interested in the thriving music streaming sector might find Spotify, the largest player in its market, an attractive option, given its expansion opportunities and recent profitability.
