The stock market has created massive wealth for long-term investors over the last 100 years. For instance, tech stocks such as Amazon and Alphabet have returned 4,950% and 3,560%, respectively, to investors since February 2003.
Investors ideally want to buy shares of companies that consistently outpace the broader markets. But identifying winning bets requires a good amount of time and expertise.
However, I have shortlisted two quality growth stocks that can help you derive exponential gains in the upcoming decade. So, let’s see how investing in Tesla (NASDAQ:TSLA) and Shopify (TSX:SHOP) can help you turn $20,000 into $100,000 by 2030.
Tesla is a market leader in the EV space
The largest company in the electric vehicle (EV) segment, Tesla is valued at a market cap of US$635 billion. While Tesla stock is down 50% from all-time highs, it has surged 63% in 2023. The long-term prospects for EV stocks are quite optimistic, given battery-powered vehicles might account for 50% of all passenger cars sold in the U.S. by 2030, according to a Bloomberg report.
Tesla will face competition from legacy manufacturers such as Ford, Toyota, and Volkswagen as well as from new entrants including Rivian, Nio, and Lucid Group. But its leadership position and strong brand value provide Tesla with a wide economic moat that is difficult to breach.
Further, Tesla is likely to wrestle with a challenging macro-environment in 2023, which will impact both sales and profit margins. However, analysts still expect the EV giant to increase sales by 26.2% to US$102.83 billion in 2023 and by 28.6% to US$132.5 billion in 2024.
TSLA stock is priced at 6.2 times forward sales and 50 times forward earnings, which is quite steep. However, it enjoys significant pricing power, making it one of the most profitable automobile stocks on the planet.
Tesla’s earnings are forecast to narrow by 2% in 2023. However, between 2023 and 2027, the bottom line might expand by 24% annually. If TSLA stock can continue the expansion of its bottom line and increase earnings to US$15 per share by 2030, its stock should surge 400% at current multiples.
Shopify stock is down 74% from all-time highs
Similar to other growth stocks, Shopify has also endured a difficult period in 2022. Right now, SHOP stock is down 74% from record highs, valuing the Canadian tech giant at a market cap of $72.3 billion.
Despite the massive pullback in the last 12 months, SHOP stock has returned an astonishing 1,690% since its initial public offering in mid-2016.
Investors are worried about a deceleration in revenue growth for Shopify after the COVID-19 pandemic allowed the company to increase sales from US$1.57 billion in 2019 to US$4.61 billion in 2021.
In 2023, Shopify’s revenue is forecast to rise by 18.8% to almost $9 billion. But its earnings are likely to remain flat year over year, as the company is looking to reinvest profits to support future growth. For instance, Shopify is investing heavily in building a wide network of fulfillment centres to optimize the supply of its merchant base.
Shopify has more than two million merchants onboard, and these investments are likely to improve customer-retention rates and spending on its platform.
Shopify is part of a rapidly expanding addressable market. Even if the stock reclaims its record highs by 2030, it will result in a 400% gain for investors, allowing you to turn an investment of $20,000 into $100,000.
