Many investors consider $1 million in savings to be a solid benchmark to reach by retirement age. And yet, according to the latest data from the Federal Reserve, American retirees between the ages of 65 and 74 have accumulated a median nest egg of just $409,900.
A lot of Americans are falling short of that million-dollar mark because they didn't invest enough of their savings in ways that grew the principal significantly. Over the past 30 years, the S&P 500 generated an average annual return of 10.5% and would have turned a $100,000 investment into $1.2 million. The U.S. dollar lost more than half of its purchasing power during the same period.
Image source: Getty Images.
Even if you don't have 30 years left until retirement, it might be smart to start socking away some of your savings in stocks instead of leaving it in places where inflation can take its toll. If you want to get started today and can afford to lock away $100,000 for the next 10 years in investments, I believe three high-growth stocks have what it takes to deliver millionaire-making gains by the time you retire: Cloudflare(NYSE: NET), MicroStrategy(NASDAQ: MSTR), and Arm Holdings(NASDAQ: ARM).
1. The cloud and cybersecurity play: Cloudflare
Cloudflare hosts a cloud-based content delivery network (CDN) that accelerates the delivery of digital content for websites and apps. It accomplishes that by storing cached copies of digital media on edge servers that are physically located closer to the end user than the origin servers. It also shields websites from bot-based attacks.
Cloudflare went public in 2019, and its revenue had a compound annual growth rate (CAGR) of 46% from 2019 to 2023. It currently delivers data from 330 cities in over 120 countries across the world, and it processes more than 60 million HTTP requests per second.
It has also repeatedly claimed that it will become a "water filtration" system for the modern internet that will reduce the need for third-party cybersecurity services.
From 2023 to 2026, analysts expect Cloudflare's revenue to have a CAGR of 28%. If it matches that outlook, maintains a similar valuation, and maintains a CAGR of 20% from 2026 to 2034, its stock could rise nearly tenfold by the final year.
But for that to happen, it still needs to narrow its losses, expand its ecosystem with new services, and widen its moat against smaller competitors like Fastly and older CDN leaders like Akamai. Therefore, Cloudflare is still a risky growth stock right now -- but it might have plenty of upside for patient investors.
2. The bold Bitcoin bet: MicroStrategy
MicroStrategy is slow-growth enterprise software company whose revenue had an anemic CAGR of 1% from 2020 to 2023. Analysts expect its revenue to have only a CAGR of 2% from 2023 to 2026 as it gradually expands its newer subscription-based cloud services to offset the sluggish growth of its on-premises software.
That doesn't sound like an exciting growth story, but the company abruptly shifted gears four years ago when it started to hoard Bitcoin. It ended its latest quarter with 226,500 Bitcoins on its balance sheet. It bought those for $8.3 billion at an average price of $36,821, and they're now worth about $12.9 billion.
That equals nearly half of its enterprise value of $28 billion, and management plans to keep buying more Bitcoin. That evolution could make MicroStrategy a red-hot stock over the next decade if the cryptocurrency's price skyrockets.
Social Capital's Chamath Palihapitiya says Bitcoin could hit $500,000 by 2025, while Fidelity's Jurrien Timmer sees it reaching $1 million by 2038-2040. If the digital coin comes anywhere close to hitting those lofty price targets, MicroStrategy's valuations could explode and easily turn a $100,000 investment into more than $1 million.
3. The forward-thinking semiconductor play: Arm
Arm Holdings is a United Kingdom chip designer that licenses its architecture to chipmakers like Qualcomm and Apple. It doesn't manufacture any chips on its own, but Arm-based chips now power about 99% of all premium smartphones and are gradually creeping into the PC and server markets.
Arm prevented Intel's x86 chips from gaining a foothold in the mobile market because its architecture was more power efficient, more customizable, and cheaper for its partners to manufacture. Its asset-light licensing model also enabled it to evolve faster than Intel since it let its chipmaking partners do the heavy lifting.
Arm was acquired by the Japanese conglomerate SoftBank in 2016 and spun off again last September. Its revenue rose 21% in fiscal 2024 (which ended this March) as the smartphone market stabilized, and analysts expect its top line to show a CAGR of 23% from fiscal 2024 to fiscal 2027. That robust growth should be driven by its new high-royalty AI chip designs as well as its new automotive and cloud computing chips.
If Arm matches those estimates, maintains its current valuations, and keeps growing its revenue by at least 20% annually over the following seven years, it might just deliver a nearly 10-bagger gain by fiscal 2034.
Should you invest $1,000 in Cloudflare right now?
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Leo Sun has positions in Apple. The Motley Fool has positions in and recommends Apple, Bitcoin, Cloudflare, Fastly, and Qualcomm. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
