Experts pick stocks to watch: Could these three shares be the next Afterpay?

Canstar asked three experts to nominate a company that they think could be the next big thing – a stock that has the potential to be the next Afterpay. Here are their picks.

Chris Batchelor’s pick: Family Zone Cyber Safety

Education delivery has been transformed over the past two years. Many children overseas spent an entire year home learning. Australian parents are also well versed in the joys and tribulations of home learning.

Whilst COVID-19 will pass and kids will return to the classroom, education delivery has shifted. Students in secondary school do most of their classwork on a computer or tablet device. Sometimes these devices are provided by the school. In this situation, schools have a duty of care to ensure that children are safe.

Family Zone Cyber Safety (ASX: FZO) has a suite of products aimed at protecting children in the online environment. They are marketed to schools and parents. Currently, Family Zone serves 18,000 schools and nine million students across Australia, US and UK.

Revenues are on a steep ramp. In the 2021 financial year revenue grew 76%, with US revenue growing 266%. The company also recently acquired a market-leading UK business servicing 38% of schools. Revenue is forecast to increase by a factor of six over the next two years.

The opportunity size is huge with approximately 70 million students across Australia, the UK and US. And, of course, there is the potential to expand into other markets.

With children spending more and more time online – both for education and leisure – the need for security is paramount. Family Zone is already in a leading position in this market but has only just begun to tap the opportunity.

Chris Batchelor (CFA) is the CEO of Spotee (AFSL 521404), a provider of sharemarket education, research and advice. He is an experienced leader and investment expert having worked in financial markets for over 25 years. He is qualified as a Chartered Financial Analyst and holds a Graduate Diploma of Applied Finance and Investment and Bachelor of Commerce Degree.

Nathan Bell’s pick: Frontier Digital Ventures

Frontier Digital Ventures (ASX: FDV) is a $500 million company founded by its CEO Shaun Di Gregorio. It owns stakes in a portfolio of online property classifieds in rapidly growing Frontier markets.

The company has made huge strides in the past year that aren’t currently reflected in its share price. It joined forces with competitors in certain countries that have waved the white flag as Frontier’s companies were becoming the clear market leaders. It consolidated its markets in south and central America with potentially very cheap acquisitions from large competitors offloading smaller businesses to focus on other far bigger businesses. It also has deals in place to sell some of these businesses over the next couple of years.

It’s currently trading at half the price that several inferior businesses in the industry have recently changed hands at. But we’re not looking for a short-term bump. Di Gregorio is aiming to create a $3.5-$5 billion business. Given iProperty’s share price increased 10-fold before he sold it to his previous employer, REA Group, we expect him to succeed.

Nathan Bell (CFA) is Portfolio Manager at InvestSMART (AFSL 226435) and has more than 20 years of investment experience. At the time of writing, Nathan owns shares in Frontier Digital Ventures personally and The Intelligent Investor Growth Fund (ASX: IIGF) and The Intelligent Investor Ethical Fund (ASX: INES) also hold the stock.

Scott Phillips’ pick: Marley Spoon

Just as generals should never fight the last war (equipment, terrain, strategies, and experience all change the battle), the ‘next Afterpay’ is probably not going to be too much like the last one. But it does have to share some similarities.

It needs to be small (to have enough growth runway left to deliver Afterpay-like returns). And, like Afterpay, it needs to have a market big enough that it can go from that small to very, very large. Global markets are a good start. Preferably a company that can scale quickly, without needing a lot of new capital or large (slow) investments in new plant and machinery.

One company with those prospects is meal kit purveyor Marley Spoon (ASX: MMM). And while shares have been on the slide recently, the business itself continues to grow and, if it plays its cards right, could continue to compound at double-digit rates for many years to come.

Scott Phillips is Chief Investment Officer at The Motley Fool (AFSL 400691) and runs the Motley Fool Share Advisor, Million Dollar Portfolio and Everlasting Income services. Scott holds a Bachelor of Commerce, a Graduate Diploma in Accounting. At the time of writing, The Motley Fool owns shares in Marley Spoon.

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