I love growth stocks — identifying them, buying them, and holding them for the long term. If done right, this type of investment can deliver massive returns and help set someone up for life. So, let’s take a look at two stocks I think are poised for years of solid gains.

Image source: Getty Images.

Spotify Technology

Sometimes, the best stocks are right under your nose. Or, in the case of Spotify Technology (SPOT 0.36%), in your ear. You see, so far in 2024, Spotify stock is up more than 71%. That makes it one of the top-performing stocks on Wall Street. Except, strictly speaking, Spotify isn’t on Wall Street.

Since it’s a European company (domiciled in Luxembourg), Spotify isn’t part of the S&P 500, the Nasdaq-100, or the Dow Jones Industrial Average. However, if it were, it would be at or near the top of each of them. The stock’s year-to-date performance would place it fifth in the S&P 500, second (behind only Nvidia) on the Nasdaq-100, and at the very top of the Dow Jones.

At any rate, Spotify’s excellent stock performance is a result of several key factors:

• The popularity of its streaming platform
• Effective cost management
• Strong revenue growth

As of its most recent quarter (ended on June 30), Spotify reported 626 million monthly active users (MAUs), up 14% year over year. By having such a large user base, Spotify can generate significant revenue — $4.1 billion in its most recent quarter, up 20% from a year earlier.

And while those user and revenue numbers are excellent, what’s really driven the stock higher this year is the company’s improved profitability.

SPOT Net Income (TTM) data by YCharts

Spotify’s net income over the last 12 months increased to $505 million. That’s a far cry from the $776 million annual loss it reported in 2023. By trimming some staff and focusing on the company’s core business (music streaming), CEO Daniel Ek has put Spotify on a winning path. Investors should take note.

Visa

Next up is Visa (V 0.20%). Sure, it might sound a bit boring, but let me tell you something. Boring can be profitable — very profitable. First of all, to understand why Visa is such a great stock, you must understand its business model. Visa isn’t a bank or a credit card issuer; it’s a payment processor.

The company provides access to its payment network for card issuers, like banks and credit unions, which then provide Visa-branded credit and debit cards to their account holders. When those consumers use their cards at one of countless merchants across the globe, Visa collects a transaction fee. To seriously understate the case, those fees add up.

In its most recent period (third quarter of 2024, ended June 30), Visa reported $8.9 billion in total revenue thanks to nearly $4 trillion in processed transactions across its network. To put this in perspective, Visa processed about $133 billion worth of transactions each day during its most recent quarter. That’s equivalent to every single person on Earth processing $17 each day on Visa’s network.

Not only does this lead to incredible amounts of revenue for Visa, it also leads to a ton of profit. Since the company’s business model is asset-light, much of its revenue is converted into profit. The company reported $4.9 billion in net income for its most recent quarter, up 17% from a year earlier.

Granted, Visa has its challenges, too. One of them is the recent rejection of Visa and Mastercard‘s proposed $30 billion settlement of a lawsuit brought by merchants regarding the companies’ swipe fee practices. While that suit remains up in the air, and the settlement costs will likely increase, I’m not all that concerned. In the final analysis, everyone — consumers, merchants, and card issuers — benefits from the ease and reliability of Visa’s payment network.

Moreover, as noted earlier, Visa has the profits and cash flow necessary to withstand an even larger multibillion-dollar settlement. In the meantime, the company will continue to relentlessly drive shareholder value. For example, in its most recent quarter, the company repurchased $4.5 billion of its own shares.

Because of all that, along with its solid 10% revenue growth rate, I’m happy to own Visa shares now and for many years to come.