These companies have better growth prospects and a healthier balance sheet.
One of the hottest artificial intelligence (AI) initial public offerings of the last few years was CoreWeave (CRWV +0.58%). The company emerged from nowhere as a new cloud infrastructure provider specifically targeting the AI market, growing from nothing to billions of dollars in revenue seemingly overnight.
Today’s Change
(0.58%) $0.55
Current Price
$95.70
Key Data Points
Market Cap
$47B
Day’s Range
$90.33 – $97.50
52wk Range
$33.52 – $187.00
Volume
20M
Avg Vol
29M
Gross Margin
49.23%
However, it hasn’t been all sunshine and rainbows. CoreWeave is burning up tons of cash as it grows, has slim profit margins, and its balance sheet is loaded with debt. For these reasons, I think owning the stock at its current market cap of $50 billion is incredibly risky.
Here are two technology-focused stocks that should be larger than CoreWeave five years from now, making them better buys for your portfolio today.
Image source: Getty Images.
Coupang’s sticky data leak scandal
Coupang (CPNG 3.00%) is a South Korean e-commerce platform that has posted impressive gains in market share in its home country over the last decade. But it’s currently embroiled in a difficult data leak scandal that has turned into a political firestorm in South Korea.
First, an employee from China leaked the company’s customer data. Then, Coupang tried to assuage customers by offering coupons while ignoring hearings into the leak by South Korean politicians, which angered the government.
Recently, the government was angered even more when Coupang aligned itself with the U.S. as an American company (its headquarters are technically in the U.S.) and suffered fallout from the current tariff dispute between the two nations.
While a data leak is nothing to sneeze at, I believe the vast majority of customers will forget about it in a few years and stick with the e-commerce provider. Coupang has built an impressive business empire in South Korea, implementing an Amazon-like e-commerce ecosystem with rapid delivery, a huge selection, and a bundled subscription that includes grocery delivery and discounts.
Today’s Change
(-3.00%) $-0.53
Current Price
$17.13
Key Data Points
Market Cap
$32B
Day’s Range
$17.07 – $17.99
52wk Range
$16.74 – $34.08
Volume
42M
Avg Vol
19M
Gross Margin
29.62%
Last quarter, Coupang’s revenue grew 20% year over year on a constant-currency basis, while gross profit grew 22%. The company is only slightly profitable, but it generates positive free cash flow and has a conservative balance sheet with over $7 billion in cash, allowing it to invest in expansion.
The company plans to enter new markets, such as Taiwan, and offer new product categories, like fashion. These moves suggest Coupang is well-positioned to continue growing at a double-digit rate while generating healthy profits.
Five years from now, investors probably will have completely forgotten about this data leak. With the stock trading down 44.6% from last year’s high due to this issue, I think now is a great time to buy Coupang and hold for the long haul.
Adyen’s discounted price
Another stock in the midst of a temporary drawdown is Adyen (ADYE.Y 19.71%), which is down nearly 31% from its 52-week-high.
The company is a global payments processor, focused on enterprise customers and online capabilities. For example, it works with companies such as Uber Technologies that have vast and complicated payment needs.
Right now, payment stocks are down, providing investors with an opportunity to buy Adyen at a lower price.
Today’s Change
(-19.71%) $-2.69
Current Price
$10.96
Key Data Points
Market Cap
$43B
Day’s Range
$10.65 – $11.64
52wk Range
$10.65 – $19.94
Volume
5.1M
Avg Vol
837K
Gross Margin
83.81%
The company has stolen a lot of market share in payment processing, mainly because it has lower transaction-failure rates, easy-to-use systems built from scratch, and a wide breadth of capabilities. Last quarter, revenue grew 23% year over year in constant currency, with guidance for at least 20% revenue growth through 2026.
In the long term, Adyen expects to achieve a margin of over 50% as measured by earnings before interest, taxes, depreciation, and amortization (EBITDA), making it one of the most profitable businesses in the world. With revenue approaching $3 billion, that would turn into at least $1.5 billion in bottom-line earnings for the business, a lot of which is converted into cash flow.
Today, Adyen has a market cap of $42 billion, or an earnings multiple of 28 based on this EBITDA estimate. That may not seem dirt cheap, but for a business that keeps growing revenue by an impressive 20% or higher, investors should do fine buying today and holding for the next five years.
Like Coupang, Adyen is consistently profitable and has a conservative balance sheet. Compare that to CoreWeave’s negative $8 billion in free cash flow and over $10 billion in debt, and it’s clear which stocks are safer bets for investors over the next five years.
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