3 Soaring Stocks to Hold for the Next 20 Years

Key Points

• There’s a reason the Roblox video game platform has remained marketable when so many other games have come and gone.

• The proliferation of artificial intelligence data centers is highlighting a bunch of logistical challenges that Applied Digital is uniquely equipped to address.

• Online pet-supply retailer Chewy may never be a high-growth name, but it is a steady-growth name that’s proving it can compete with much more familiar alternatives.

• 10 stocks we like better than Roblox ›

It can be intimidating to step into a stock that's been in full-blown rally mode for a while. It feels like you're paying a steep price that could tumble at the drop of a hat. And to be fair, sometimes that's exactly what happens.

For true long-term investors though, the biggest risk remains not being in the market while waiting for buy-worthy dip. Too much of the time, a rising stock just continues to rise.

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With that as the backdrop, here's a closer look at three soaring stocks to go ahead and plow into for the next 20 years. It might take that long for each company to fully benefit from its underlying opportunity.

Image source: Getty Images.

1. Roblox

You may know Roblox (NYSE: RBLX) as a video game, but the description doesn't do it justice. It's a game-building platform that allows enthusiasts to build their own virtual worlds and then monetize their creation by inviting other players in to compete with one another. Last year, Roblox paid out $923 million to its game-building community versus total revenue of $3.6 billion, up 25% and 29% (respectively) year over year.

Now, anyone who knows anything about the video-gaming business likely knows that interest in video games can be relatively short-lived, as players shelve one title to focus on the next and newest release. This industry-specific dynamic is one of the chief reasons some investors don't bother with video gaming stocks at all -- their underlying companies are unpredictably inconsistent.

Roblox may be a worthy exception, however, simply because the gameplay that the platform provides is always fresh, since it's being constantly updated by gamers themselves. That's how the company has done the unthinkable by growing its revenue nearly each and every year since launching the platform all the way back in 2006.

The kicker: The company's tech is now being used to build immersive virtual worlds for non-gaming purposes. Walmart, Nike, and e.l.f. Beauty are just some of the third-parties tapping Roblox to power their marketing-minded metaverses. While the metaverse movement may be slower-moving than first envisioned, there is at least movement working in Roblox's long-term favor.

One of the chief (but understandable) criticisms of Roblox is its lingering losses. The persistent revenue growth is impressive, but at nearly 20 years old, the company is alarmingly still in the red.

Much of the reason shares are up a hefty 150% just since April's low, however, is that the promise of profits is finally becoming a reality. While that day is still at least three years down the road, it's also far less than 20 years into the future. Investors are starting to buy in anticipation of this catalyst.

2. Applied Digital

If there's one thing the rapid proliferation of artificial intelligence data centers has demonstrated, it's this: The world's not actually ready for the rapid proliferation of data centers. They're electricity-hungry, and surprisingly complicated as well as expensive to build and operate.

Enter Applied Digital (NASDAQ: APLD).

While its roots are in the cryptocurrency business, much of what Applied Digital learned during the crypto craze of yesteryear applies to data centers -- and artificial intelligence data centers in particular -- today. That is, these sprawling facilities need access to lots of low-cost electricity, they need to be easily cooled, and they need to be digitally connected to everywhere -- a tall order to be sure.

But Applied Digital can (literally) build to order. It recently announced a 15-year agreement to lease an AI data center to service provider CoreWeave, for example, that will generate on the order of $11 billion in total revenue during this timeframe. Among other things, CoreWeave likely appreciated the fact that the facility in question is designed to be powered by cost-effective renewable energy, and will be relatively easier to cool by virtue of being located in North Dakota. And that's just a sampling of the kind of business relationships Applied Digital is cultivating.

Like Roblox, Applied Digital isn't yet profitable. Also like Roblox though, that day is likely coming sooner than later. An outlook from McKinsey suggests that between now and 2030 the world is going to invest nearly $7 trillion in data centers, $3 trillion of which will specifically go toward the real estate and infrastructure.

That's the chief reason Applied Digital shares are up nearly 400% from their April low -- that, and the fact that the industry's tailwind has analysts thinking this company will reach profitability by 2028. Its growth opportunity, however, extends well beyond that point.

3. Chewy

Finally, add online pet-supply store Chewy (NYSE: CHWY) to your list of soaring stocks to buy for the next 20 years.

Anyone keeping tabs on this ticker probably knows it wasn't soaring following Wednesday's release of its second-quarter numbers. It crashed, falling as much as 17% to unwind another big chunk of the 200% run-up from its multiyear low made early last year.

Just take a step back and look at the bigger picture. Last quarter's sales of $3.1 billion were up 8.6% year over year, extending a well-established growth trend. Per-share earnings of $0.33 were up from the year-ago comparison of $0.24 as well, also extending an established (even if somewhat erratic) trend. Moreover, Chewy reported a 4.5% increase in its total number of active customers, and a 4.6% increase in the amount of money each of them spent, extending and improving trends as well. The company's only misstep? Merely meeting rather than exceeding analysts' Q2 estimates.

And the foreseeable future looks bright. Although it's become clear that Chewy will never be a high-growth name, its slow growth is built to last, fueled by the ongoing shift from brick-and-mortar shopping to e-commerce. Data from the American Pet Product Association indicates that while the United States' in-store spending on pet food fell by $300 million last year, online purchases of pet food grew $1.4 billion, painting a picture of the business's broader shift...

...a shift further fueled by simple demographics. Yes, the younger the pet owner, the more likely they are to purchase online, and the more likely they are to utilize a subscription to their supply of pet food. In this vein, Chewy's autoship sales improved nearly 15% year over year last quarter (extending yet-another growth trend) to now account for more than 78% of its total revenue.

Bottom line? Chewy is delivering -- figuratively and literally -- exactly what consumers increasingly want. This stock's post-earnings setback is a buying opportunity that isn't apt to linger very long.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy, Nike, Roblox, Walmart, and e.l.f. Beauty. The Motley Fool has a disclosure policy.