Getting started early with a growing business in an emerging market can turn $ 1,000 into $ 1 million, as some investors have seen with it Apple or Amazon. For those who may have missed the launch of these two companies, the good news is that we’re just entering the early stages of the 5G, cannabis, and Metaverse markets.
The long-term potential is enormous for three companies in particular. While working in different sectors, Marvell Technology Group (NASDAQ: MRVL), Green thumb industries (OTC: GTBIF), and Nvidia (NASDAQ: NVDA) share something that makes them an excellent addition to any portfolio: For them, the future begins now.
As 5G technology pervades its way into businesses and consumer lives, Marvell is establishing itself as one of the early market leaders specializing in the networking and storage of data infrastructures. Its network products include application-specific integrated circuits, Ethernet solutions and processors, and offers storage products such as fiber channels and storage processors. All of these products support growing demand in data centers, the automotive sector, and corporate markets.
In June, the US News & World Report highlighted Marvell along with well-known competitors Broadcom and Qualcomm, as the top 5G stocks in 2021. Leading research company gardener (NYSE: ES) says the global 5G network infrastructure market will grow 39% year over year in 2021.
Corresponding Bank of America, companies focused on wireless infrastructure are in the early stages of a cycle that is expected to last 10 years. This is in line with market growth projections from Grand View Research, which said the global 5G services market valued at $ 41 billion in 2020 through 2028 will break out with an average annual growth rate of 46%. And the infrastructure market, valued at just $ 2.6 billion in 2020, is expected to outperform the entire services market with a CAGR of 50% over the same period.
Marvell has had a busy 2021 so far, with big announcements every quarter. In March it teamed up with Samsung introduce a new system on a chip. The collaboration will support 4G and 5G networks at the same time while improving 5G performance and reducing power consumption by up to 70% compared to previous solutions. The system is used in Samsung’s larger MIMO (multiple-input-multiple-output) radios for improved wireless communication.
A month later, the company completed the acquisition of Inphi and added a high-speed electro-optics portfolio to improve connectivity for data centers and carrier networks. The company expects Inphi to expand its addressable market to $ 23 billion while increasing its CAGR to 12% year over year. The annual growth rate for the past five years was only 1.72%.
Before the end of the second quarter, it announced a quarterly dividend of $ 0.06 per share to shareholders of record on July 9, a yield of 0.5% – unchanged since the fourth quarter of 2020. For comparison: S&P 500The average return is less than 2%.
The dividend announcement was followed by another acquisition, that of Innovium, which added a portfolio of “cloud-optimized switches” to expand its Ethernet offering. Innovium is expected to generate sales of $ 150 million in fiscal 2023.
All signs point to Marvell as the company holds a leadership position in 5G technology now and in the future. It feeds on record revenues of $ 1.07 billion in the second quarter, a 48% year-over-year increase and a sequential improvement of 29% over the first quarter of this year. The record revenue was driven by strong sales in the data center market, where growth is expected to continue into the third quarter and beyond.
2. Green thumb industries
As we witness the 5G technology revolution, there is another industry that has a future price in mind. The cannabis market has grown exponentially in the United States in recent years. Sales of legal cannabis in the US rose 46% from 2019 to 2020 alone, to a total of $ 17.5 billion.
At the top of these state-run markets is California, with sales of $ 3.8 billion in 2020, followed by Colorado with $ 2.2 billion and Illinois (the home state of Green Thumb) with just over a billion U.S. dollar.
Green Thumb was a strong contributor to these sales figures, benefiting in particular from growing demand in Illinois and Pennsylvania. As a vertically integrated, multi-state operator, Green Thumb manages a complete supply chain. It processes and sells its products in 14 US markets through 16 manufacturing facilities and 62 pharmacies with licenses for an additional 49 retail locations.
The company’s earnings report for the second quarter showed revenue growth of 87% for the six months ended 30. The company also posted a fourth straight quarter of positive GAAP earnings at $ 0.10 per basic and diluted share.
As of July, 19 states and the District of Columbia allow recreational marijuana. As more states pass similar laws, there is a growing belief that they will ultimately be legalized at the federal level. In this case, a large group of investors may wish to have bought shares in this future market leader.
It is very likely that you have used Nvidia products whether you know it or not. As a leading supplier of artificial intelligence and graphics processing equipment, the company has a powerful line of products for various industries, including games, mechanical engineering, supercomputing and robotics. Its products can be found in self-driving vehicles, data centers, hospitals, augmented and virtual reality devices and predictive analytics, to name just a few.
What you may not know is the metaverse – a term used for the future of internet collaboration – and Nvidia’s role in creating a realistic interactive and collaborative collection of 3D virtual worlds. Supported by its RTX technology, Nvidia Omniverse offers a common platform on which live collaboration between users and applications takes place at real-time speed and simulated reality. Examples could be user interaction in video games or attending a business meeting as a hologram.
The metaverse is expected to be the future of work and leisure and an increasingly common aspect of our daily lives. Other companies with early involvement are Facebook, Roblox, Unity software, and Microsoft. All of these with the exception of Facebook are currently in the top 10 holdings in the world Roundhill Ball Metaverse ETF (NYSEMKT: META)with Nvidia taking the leading position in asset weighting at 8.7%, a full 3% more than the secondary position.
Nvidia stock has been on the brink lately, helped by record sales of $ 3 billion in the second quarter and a 4-for-1 stock split on July 20. But even after a price increase of 71% year-to-date it probably still has plenty of room to grow. The average analyst target is slightly above the current price of $ 223, but the high is at $ 328, a potential 47% increase.
That may seem high after such big gains recently, but according to research firm Strategy Analytics, the global Metaverse market is projected to reach $ 280 billion by 2025 – six times its value of $ 46 billion in 2020.
The future is now
Out of these three companies, I would consider Marvell and Nvidia as easy opportunities to make big bucks in these emerging markets. As for Green Thumb, its presence is expanding in a promising cannabis market, but it may be a little riskier than Nvidia and Marvell. Nobody really knows if or when marijuana will be legal for recreational use at the federal level. So the risk may be a little bigger in marijuana stock, but the potential reward is superb, and the company has proven that as a multi-state operator, it can make money regardless of state cannabis laws.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.