Investing in top growth stocks has been a strategy that’s paid off for most of recent history. Indeed, nearly an entire generation of Millennials haven’t really been of investing age to see a truly painful market crash. And with the Nasdaq Composite surging 127% over the past five years, outpacing the S&P 500’s 95% gain, many younger investors have certainly been very correct in concentrating their portfolios in higher-growth tech stocks.
While many top growth stocks have certainly surged to levels that some investors may consider to be rich (to say the least), there are others that have taken a more volatile path to their current state that may still be worth considering from a valuation perspective. The three companies on this list of growth stocks to buy have each had higher multiples in the past, which have been taken down for one reason or another. Accordingly, those with a truly long-term investing time horizon may want to consider picking these stocks up, before the market goes on another bull rally higher (as many experts predict).
No one knows the future, and I’m not suggesting that will be the case. But for those looking to add some risk at this point in the cycle, here are three placed I’d look first.
Key Points About This Article:
- Growth stocks have outperformed their value peers for a very long time, and this outperformance has only seemed to grow over the past five years.
- While some recessionary warning signs are picking up, those looking to add exposure to top growth stocks may want to consider these three names.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Shopify (SHOP)
E-commerce giant Shopify (NYSE:SHOP) is certainly a growth stock I’ve pounded the table on in the past. The company’s business model is rather simple – Shopify provides a full service platform allowing businesses of all sizes to set up online shops. In exchange for these services, the company takes a small cut of transactions over a certain threshold. That means that as these companies grow (and the economy overall surges), Shopify does well.
Of course, during the pandemic when most companies were forced into reconsidering online business models, Shopify’s growth was incredible. Gone are the days of triple-digit revenue growth. But the company’s recent Q2 report, which highlighted 21% revenue growth to $2 billion and GMV rising 22% to $67.2 billion, was impressive. Shopify brought in GAAP earnings of $170 million or $0.13 per share and adjusted earnings of $0.26 per share. Despite its market dominance, future growth may slow, and expanding through new services or increasing its take rate could be key, though its logistics effort fell short.
That said, Shopify’s stock price did surge 21% in August followed by these stronger-than-expected second quarter earnings. I think there could be more room for upside with this stock, particularly if this sector continues to see the kind of secular growth trends many experts expect.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is perhaps one of the best-known companies in the world. The social media giant now carries a $1.3 trillion market cap and continues to remain a central portfolio holding for many growth investors, for good reason. The social media giant continues to produce incredible cash flow growth, and has been using that excess cash to reinvest in the higher-growth portions of its business over time.
While much of that spending has been centered on the company’s metaverse ambitions, AI spending has really picked up of late at Meta. The tech giant continues to buy high performance chips in bulk, in a bid to use AI technology to enhance its current offerings. In many respects, if there’s a tech company that can most directly benefit from AI, I’d have to put Meta right near the top of the list.
Meta’s stock price has been volatile in August, sinking from its all-time high but ending the month more than 11% higher over the past three months. I think this company’s outperformance can certainly continue, particularly if investors focus on companies like Meta that have operating leverage and vertical integration opportunities in this space.
So long as Meta continues to provide solid execution, its 3 billion daily active users across its platforms will certainly provide plenty of growth, assuming the company can continue to monetize its base in the efficient manner it has in the past. This is a long-term growth story that is far from over, in my view.
Super Micro Computer (SMCI)
Perhaps the most eyebrow-raising pick of this list, and the one I certainly feel has the most risk of the three, is Super Micro Computer (NASDAQ:SMCI). This company, which provides direct liquid cooling technology to help server and data storage providers manage their efficiency, has been on one of the biggest recent boom-bust cycles out there.
Propelled by expectations of sky-high demand for its services (and some impressive market share growth numbers in this critically-important space), Super Micro’s stock price hit a fresh all-time high this year. However, since surging above $1,200 per share earlier this year, shares of SMCI stock have since sunk to around $450 apiece at the time of writing.
This move comes as the company deals with short seller concerns, as a Hindenburg Research report laid out a pretty strong bear case about why investors may want to be concerned with the comapny’s accounting practices. Investors have certainly been spooked, with the stock sinking considerably heading into Super Micro’s 10-for-1 stock split set for Oct. 1.
The company saw strong growth in fiscal 2024, with annual sales up 110% to $14.94 billion and adjusted earnings per share rising 87% to $22.09. For fiscal 2025’s first quarter, the company has projected sales growth of 207% and adjusted earnings growth of 118%.
We’ll have to see how the company’s revised earnings come in, and how much to make of the accusations that have been lobbied against the company and its management team. But for now, I think this is a stock to certainly at least add to the watch list, particularly at these much more attractive levels.
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