The stock market is full of great investment ideas right now. Some of the best companies I know have seen their stock prices plummet since the inflationary panic began in November 2021.
As an example, the three companies listed below are pioneering innovators with fantastic long-term business prospects. The inflation crisis may hurt for a while, but they are able to disrupt their target markets. Yet their stocks have suffered giant corrections in recent months. When you combine huge growth prospects with good stock prices, it creates obvious buying opportunities.
1. Sweet and Sweet Lemonade
The insurance industry is incredibly ripe for disruption. Getting the right insurance plans to meet your needs can be a difficult process, and no one likes paying huge premiums to protect their car, home, or other properties. When it comes time to file a claim, it can be a downright hostile experience. Yet some of this coverage is required by law, so there’s no getting around it.
It’s there that Lemonade (LMND -1.34%) Between.
This company wants to ease the pain of insurance by automating everything. Using artificial intelligence (AI) and machine learning tools, Lemonade analyzes risks, insurance plans, and outcomes from the past to shape the renters and auto coverage plans of the future. You sign up through an online form, claims are settled by machines, and you don’t have to fight human insurance agents to get what you need from Lemonade’s services. These are the early days of Lemonade’s ambitious growth story. The company is not profitable, but the turnover is skyrocketing:
Don’t be scared off by this plummeting profit chart. Economies of scale are about to kick in and the company is just getting started in the auto insurance market. Lemonade’s management team expects the next quarter to show record losses, followed by a sustained uptrend. In the long term, this AI-powered business model should result in low operating costs and near-optimal risk management. Just give those computers time to learn the ropes.
And the target market is gigantic. Lemonade’s revenue was just $171 million in the past four quarters, based on $110 million in net insurance premiums. Industry giant progressive collected net premiums of $46.9 billion and revenues of $47.7 billion during the same period. Lemonade can create a massive business by taking just a tiny handful of Progressive customers and friends. I believe the company will achieve much more than this in the long run, so the stock is an obvious buy today.
2. Universal display is already everywhere
And the future looks even bigger. I am not joking.
Organic light-emitting diode (OLED) displays are already found in nearly every high-end smartphone worth its salt, including all Apple iPhone line. The technology is also familiar in mid-range handsets these days. OLED panels are also making their way into the living room, starting with high-end televisions. Then we should see OLED-based lighting panels take a similar journey from expensive novelty to everyday necessity.
Universal display (OLED 1.81%) develops the technology behind these ultra-efficient OLED panels, distributing licenses to display builders around the world. The company also acts as a materials dealer, controlling the supply of chemicals that go into making these ultra-efficient digital displays and lighting panels.
Generally, Universal Display’s royalties and hardware fees are based on the total area of OLED panels built with its technology. That’s why big-screen TVs are such a powerful upgrade from the world of small-screen tablets and smartphones.
And like I said, this is just the beginning. In the long run, I expect to see OLED panels in just about anywhere you’d use an LCD screen today – and more. You see, OLED displays can do things that old-school displays would never dream of. For example, you can bend or roll up an OLED display with the right kind of surface materials or build transparent displays where the image appears to float in mid-air. And yes, pixels emit their own light, as the name of the technology suggests, which is why you can use them for home lighting.
OLED is an exciting technology with many real-world use cases, and I can’t wait to see where Universal Display goes from there. The company is shaking up the concept of video screens.
3. Netflix is just taking a relax pill
Good old netflix (NFLX 1.32%) changed the world before. Its iconic red DVD shippers shattered the video library industry over a decade ago. Netflix could have rested on its laurels, but chose to abandon the DVD rental space altogether when high-speed internet connections became fast and common enough to support an all-digital video streaming business.
Almost exactly 11 years after the Qwikster event established video streaming as a serious business operation for Netflix, things have changed. Netflix is still the global leader in streaming media subscribers, award-winning content productions and digital media revenue. waltz disney is catching up fast, but with a cheaper subscription service that’s automatically easier to sell in a price-conscious market. Other rivals are trying to establish themselves as producers of high-quality television shows, family meals and other niches. But Netflix is way ahead of the competition, paving the way for tremendous business growth as the streaming industry takes over from cable, broadcast, satellite and movie publishers.
In fact, Netflix is currently at an important crossroads. The company is shifting its focus from maximum subscriber growth to profitable long-term growth. Many investors failed to notice this crucial strategy update, and this misunderstanding caused the stock price to plummet massively when seemingly paramount subscriber growth slowed in 2022.
Netflix is therefore exploring new products while focusing on bottom line profits and revenue with newfound intensity. The stock is now trading 68% below all-time highs from last November, exploring stock prices not seen since early 2018. At the same time, core business is healthier than ever. Netflix’s earnings before interest, taxes, depreciation, and amortization (EBITDA) are $20 billion today, equivalent to the company’s total sales in 2020.
Netflix is moving, and the massive sale in 2022 didn’t make sense. Here we are looking at a game-changing investment opportunity, folks. I added to my Netflix holdings over the summer, and I highly recommend you do the same. Digital media is the future, and Netflix is leading the way, even if the stock chart sends different signals.
Anders Bylund holds positions at Lemonade, Inc., Netflix, Universal Display and Walt Disney. The Motley Fool holds positions and endorses Apple, Lemonade, Inc., Netflix and Walt Disney. The Motley Fool recommends progressive and universal display and recommends the following options: $145 Long Calls January 2024 on Walt Disney, $120 Long Calls March 2023 on Apple, $155 Short Calls January 2024 on Walt Disney and $130 short calls from March 2023 on Apple. The Motley Fool has a disclosure policy.