If You Invested $7,000 Into Each of These 3 Stocks at the Start of 2023, You'd Be Up Over $1 Million Right Now

Key Points

• These companies have drastically improved their financials in just a couple of years.

• Improved economic conditions and a focus on AI solutions are some of the reasons they have been thriving.

• 10 stocks we like better than Palantir Technologies ›

Growth stocks have the potential to generate life-changing returns for investors. And if you're willing to take on a bit of risk, the payoff can be substantial, especially for turnaround stories. Not every struggling growth stock will rebound and become a big winner, but when it does happen, the returns can be gargantuan.

Three stocks that weren't even profitable a few years ago but have turned things around to become some of the most captivating growth stocks on the market are Palantir Technologies (NASDAQ: PLTR), AppLovin (NASDAQ: APP), and Carvana (NYSE: CVNA). Here's how much a $7,000 investment in each of these companies at the beginning of 2023 would be worth now (as of Sept. 18).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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Palantir Technologies: $192,960

Data analytics company Palantir Technologies has exploded in popularity with retail investors in recent years. It has enhanced its platform via artificial intelligence (AI), which has opened up tremendous growth opportunities, and CEO Alex Karp has done a great job of hyping up Palantir's long-term potential.

In its most recent quarter, the company reported more than $1 billion in quarterly revenue for the first time thanks to 48% year-over-year growth. It also posted strong net income of $326.7 million. The business has come a long way from the days when it was generating huge losses. As recently as 2022, it incurred a net loss of $373.7 million on annual revenue of $1.9 billion.

Palantir has been able to generate returns of more than 2,600% since the start of 2023. A $7,000 investment in the company back then would be worth nearly $193,000 today.

Its valuation, however, has become inflated in the process. With a price-to-earnings (P/E) ratio of more than 570 and the highest price-to-sales valuation in the entire S&P 500, it may be running out of room to run much higher. This is one of the most expensive stocks any investor can own right now.

AppLovin: $413,170

A tech stock that's been even hotter than Palantir over the past couple of years is AppLovin. The advertising technology company has also utilized AI to enhance its operations. Its Axon AI platform helps connect advertising demand to supply from publishers, in an effort to minimize spend and maximize return on investment.

AppLovin has been experiencing explosive growth. Sales in its most recent quarter totaled $1.3 billion, up 77% year over year. Meanwhile, earnings of $820 million soared by 164%. With some incredible profit margins, the company has been able to scale incredibly well, and doing so can help bring its P/E multiple down. It trades at around 90 times earnings but based on analyst estimates, its forward P/E is a more reasonable 46.

AppLovin is on the expensive side, but its valuation is not as extreme as Palantir's. With terrific margins and even faster growth, it may be the better buy. That said, the stock still comes with elevated risk. Since 2023, shares have soared 5,800%, and it would have turned a $7,000 investment into more than $413,000.

Carvana: $558,460

Where there's the most risk, there can be the greatest upside. There were concerns a few years ago that Carvana, which operates an online platform for buying and selling used cars, might be facing bankruptcy. With a high debt load, high costs, and unfavorable macroeconomic conditions, investors would have been taking on significant risk buying the stock at the start of 2023.

However, things have worked out exceptionally well for Carvana. Its restructuring has been successful, and it also hasn't hurt that meme stocks have risen in popularity again, enticing retail investors to take a chance on the business. Carvana posted a profit of $308 million in its June quarter on revenue of $4.8 billion, which rose 42% year over year. That's in stark contrast to 2022, when it incurred a mammoth full-year loss of nearly $1.6 billion, despite generating revenue of more than $13.6 billion.

Carvana's business is still risky today -- its margins are extremely low and if economic conditions worsen due to tariffs, that could impact demand. Since 2023, it has amassed returns of more than 7,800%, and a $7,000 investment in the business would now be worth close to $559,000.

Together, a $7,000 investment in each of the stocks listed above would have created a portfolio worth over $1.1 million after less than three years.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.