Famous hockey player Wayne Gretzky once said, “I skate to where the puck is going, not where it has been.” Chasing the market after the trend is already clear can be a losing strategy. It’s important to always look forward, because the real money is being set.
Perhaps no one embodies this metaphor better than the late co-founder apple, Steve Jobs. Gretzky’s quote, one of his favorites, was adept at identifying where consumer habits were headed and then satisfying them with revolutionary devices like the iPod and iPhone.
Apple may be a $2 trillion behemoth today, but now there are several smaller tech companies that can shape the future in their own ways. confluence (CFLT 1.09%) and upstart (UPST -1.28%) It could be both of them.
Confluent powers real-time online experiences
Consumers are spending more and more time online, and their digital habits are changing rapidly. Just 10 years ago, uploading all of your personal information to a social media platform or conducting banking on a smartphone would have been almost unthinkable, but these activities are now commonplace. They also fuel the need for instant experiences.Consumers have it at their fingertips, and they want everything available Now.
Technologies like cloud computing have helped businesses deliver instant experiences to customers, but platforms like those offered by Confluent are the real secret sauce. Confluent is a dataflow tool designed to enhance the performance of the Apache Kafta platform, used by 80% of users wealth 100 companies.
It works behind the scenes to provide businesses in real time with critical analytics that help them serve their customers. For example, if you run a sports betting platform, Confluent allows you to quickly calculate and provide real-time odds to customers instantly during a match.or take the retail giant walmart — It uses Confluent’s tools to help track inventory levels in real time, so products can be replenished as they’re purchased. In other words, Confluent is the reason customers want items that are rarely out of stock.
The need for the Confluent platform was obvious. The company’s 2022 revenue is expected to reach $579 million. Had it gone public, the company would have grown at an impressive compound annual growth rate of 57% since 2019.
Data and event streaming will only become more prominent over time. As mentioned above, these services are already used in financial services, entertainment, gaming and retail. But in theory, businesses could find a way to apply it to any cloud-based online experience their customers have.
So, with Confluent stock down 78% from its all-time high amid a broader tech sell-off, this could be a good long-term buying opportunity.
Upstarts can change the lending process
Shaping the future by doing something no other company has done before carries risks. Upstart shareholders are well aware of this. After the company went public in 2020 at $20 a share, the stock soared to $401 before falling all the way back below $13. Today, it’s trading at around $17.
Upstart is trying to upend the traditional moneylending business by using artificial intelligence systems to assess borrowers, which it says can more accurately gauge people’s creditworthiness.Consumers stand to benefit as Upstart says its model is less discriminatory than fair isaacThe time-honored FICO credit scoring system. For example, Upstart approved 43% more black borrowers and 42% more Hispanic borrowers at 25% lower rates than traditional models.
Upstart doesn’t actually borrow money. It is a loan originator, but it relies on banks and institutional partners to fund the loans, some of which dry up as credit conditions gradually deteriorate in 2022. That left Upstart holding some of the loans itself, which rattled investors and sent its shares tumbling.
But economic pressures may be slowly easing, and Upstart continues to add new bank partners and even car dealerships to its sales and loan origination platform. As of the end of the third quarter, 83 banks and credit unions had signed up, a 167% year-over-year increase. It also has 702 auto dealer partners, an increase of 141%.
Once Upstart reports its fourth-quarter results, 2022 revenue is expected to decline slightly year-over-year to $830 million. Analysts believe that figure will shrink further to $733 million by 2023, but if the economy improves and credit flows freely again, it would justify raising that estimate.
The financial industry is ripe for disruption, and artificial intelligence continues to make its mark on a growing number of industries. If Upstart can execute, its stock could deliver handsome returns for investors, especially from its current rock-bottom price.
Anthony Di Pizio has no positions in any of the stocks mentioned above. The Motley Fool has jobs and recommendations at Apple, Confluent, Upstart, and Walmart. The Motley Fool recommends Fair Isaac and recommends the following options: March 2023 Long Apple Call $120, March 2023 Short Apple Call $130. The Motley Fool has a disclosure policy.