On February 23, Jerome Powell, president of the Federal Reserve, again emphasized the central bank’s commitment to the current loose monetary policy. He noted that inflation and employment levels are still well below target and interest rates are expected to remain low.
Despite this, concerns about rising inflation and the subsequent fall in the high level of the stock market have left many investors perplexed. These are just some of the reasons why it is imperative that investors choose fundamentally strong stocks that can withstand any market condition or economic fluctuation.
If you’re looking for unstoppable stocks and have $ 2,000 in cash available that you don’t need anytime soon, Cresco Labs (OTC: CRLBF) and Fiverr International (NYSE: FVRR) may be the right choices for you.
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1. Cresco Labs
The shares of the Chicago-based pure cannabis company, Cresco Labs, have jumped more than 215% in the past 12 months and 49% so far this year – and for good reason.
Many favorable short- and long-term winds make this company an attractive investment idea. The chances of federal legalization (or at least decriminalization) of marijuana are looking better, given that Democrats control both Congress and the White House. In a legalized scenario, Cresco Labs would have much easier access to the financial services of the traditional banking system. Although the shares are currently available over-the-counter in the United States, Cresco Labs may also begin trading on major US exchanges, and increasing liquidity may further raise share prices.
Medical marijuana and recreational marijuana are currently legal in 36 and 16 states (and Washington, DC), respectively. The entire addressable market will continue to grow, as more states legalize cannabis. Cresco Lab is currently operating in nine states, which together account for 60% of the general US addressable cannabis market.
Cresco Labs differentiated itself from other multi-state operators (MSOs), such as Harvest Health & Recreation, Trulieve Cannabis, Curaleaf, and Green Thumb Industries focusing on large-scale marijuana cultivation and the wholesale distribution channel. This strategy allowed the company to benefit drastically from economies of scale. The company also operates 19 stores and has built a significant retail presence in the United States market.
Cresco Labs has managed to maintain a dominant position, both as a major wholesaler and as a retail operator, in its home state of Illinois. Since recreational marijuana was legalized in January 2020, Illinois has proven to be a fast-growing cannabis market, with sales of more than $ 1 billion in 2020. The company has also positioned itself as a major wholesale distributor in California.
In addition to strengthening its presence in existing markets, the company is also focused on expanding into new markets. In February 2021, Cresco Labs obtained its license to sell on Arizona’s recently legalized recreational marijuana market. Cresco also operates four medical marijuana dispensaries in New York. This presence, while small, may prove to be a major catalyst for growth if New York legalizes recreational marijuana in 2021. The acquisition of the company Bluma Wellness it will also position the company in the Florida market.
Cresco Labs’ financial figures were also fantastic. In the third quarter, the company’s revenue jumped more than 320% year-over-year, to $ 153.3 million. The company recorded a positive net profit of $ 4.9 million, which is a big change from the previous seven consecutive quarters of generating losses.
With several sustainable catalysts and a robust growth trajectory, Cresco’s laboratories have a solid chance of rewarding investors with considerable returns in 2021.
2. Fiverr
The freelancer ecosystem has evolved rapidly in response to interruptions related to COVID-19. Companies that opt for remote work and talent looking for work at home opportunities together have created a boost in the gig economy. Freelance market Fiverr has a solid chance of capturing a significant portion of the US online freelancer market opportunity, which is currently estimated at $ 115 billion. This is also a very sustainable opportunity, considering that the various digital transformation initiatives and a significant part of our remote working reality will persist even after the pandemic.
In fiscal year 2020, Fiverr reported 3.4 million active buyers – buyers who used Fiverr’s services – purchasing autonomous services on its platform, which represents a sharp jump of 45% year on year. In addition to the robust addition of new buyers, the company is also witnessing significant buyer retention, with existing buyers buying more frequently and purchasing higher-cost services on the platform. In fiscal year 2020, Fiverr saw spending per buyer increase 20.6% year after year, to $ 205.
All of this culminated in the company’s revenue jump 77% year-over-year, to $ 189.5 million in fiscal 2020. The company posted an adjusted EBITDA of $ 9.1 million in fiscal 2020, which is a improvement over the $ 18 million loss recorded in fiscal year 2019. Although not yet profitable, Fiverr may soon achieve this goal due to improved cost efficiency and economies of scale. The company directed revenue of US $ 277 million to US $ 284 million for fiscal year 2021, which implies 46% to 50% year-on-year growth. The company also expects 2021 fiscal EBITDA to be in the range of $ 16 million to $ 18 million.
Despite solid growth, Fiverr’s revenue represents only 0.16% of the total addressable market in the USA. Therefore, there is still room for the company to increase its revenue, increasing its market share. The company highlighted the expansion of the international market as one of the main priorities for 2021. Currently, it is present in seven countries and is focused on making it easier to connect local companies and freelancers through catalog and content improvements, as well as providing work and hiring culturally appropriate experiences. Fiverr is also investing in product innovation, marketing and branding, which in turn can improve its sales trajectory. The company recently added several features, such as subscriptions to recurring jobs, an e-learning platform and a promotional tool to give freelancers more exposure.
Currently, investors seem concerned about Fiverr’s competition, as Upwork and From Microsoft potential competitor freelancer platform, LinkedIn Marketplaces. However, there are not many reasons to worry, considering that the market for online freelancers is growing fast enough and will be large enough to accommodate a number of important players. Fiverr also set itself apart by building a simple autonomous market that allows for efficient research, as well as a well-managed e-commerce platform.
Fiverr is negotiating at a very expensive selling price (P / S), multiple above 50. However, considering the huge growth potential in the still nascent online freelancer market, this gig-economy action may turn out to be a bargain for investors, even at their high price levels.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.