In the simplest terms, growth stocks are companies expected to grow earnings and revenue at a more substantial rate as compared to the broader market. These growth stocks generally do not pay any dividends, as the company reinvests all its earnings to boost its growth. Investors buying growth stocks typically anticipate making money by selling them at a profit after substantial share price appreciation.
Some growth stocks have outperformed considerably in 2023, driven sharply higher by expectations for artificial intelligence (AI)-fueled growth. However, market breadth has been uneven, and many smaller growth names in industries like clean energy and electric vehicles (EVs) have struggled in the face of rising inflation and high interest rates.
However, with a potential Fed pivot on the horizon for 2024, it's worth taking a look at some top-rated growth stocks that could benefit from an improving economic backdrop in the year ahead. Here, we've collected some standout growth names that analysts expect to keep rallying.
AppLovin
California-based AppLovin (APP) provides end-to-end software solutions that optimize monetization to aid profitable growth and to make effective market decisions using AI. They partner with businesses on a global scale to provide personalized experiences.
AppLovin shares have soared 274% YTD, and are trading near their 52-week high of $45.10.
The mobile app advertising platform reported impressive Q3 result on Nov. 8, with revenue up 21.2% YOY to $864.3 million, beating analysts’ estimate of $796.7 million. EPS improved as well, rising from $0.06 per diluted share to $0.30 per diluted share, and surpassing estimates of $0.27. The company also reported a rise in adjusted EBITDA and net income.
Looking ahead, Wall Street is targeting 79% EPS growth for fiscal 2024.
Analysts are fairly optimistic regarding AppLovin, with a consensus “Moderate Buy” rating and a mean price target of $49.57 - signifying a 25.8% potential upside to current levels. Out of the 16 analysts currently tracking the stock, 11 have a “Strong Buy” rating, 4 have a “Hold” rating, and 1 has a “Strong Sell” rating.
Super Micro Computer
The information technology company Super Micro Computer (SMCI) is well-positioned to ride the new wave of tech, delivering its customers innovative solutions across the metaverse, AI, cloud, and 5G infrastructure. They are a rack-scale total IT solutions provider, designing energy-efficient and environmentally friendly servers, software, switches, and storage systems, along with global support, operating in over 100 countries.
Super Micro Computer’s shares are up a mammoth 253% YTD, with a market cap of $15.23 billion.
In its most recent quarterly results, SMCI reported a 14% increase in revenue YOY, from $1.85 billion to $2.12 billion, while earnings came in at $2.75 per diluted share. On an adjusted basis, EPS of $3.43 topped Wall Street's expectations. Super Micro also announced the release of the industry’s highest density server with NVIDIA HGX H100 8-GPUs system equipped with the liquid cooling 4U system.
Looking ahead, Wall Street is targeting 36% EPS growth this fiscal year, and 10% in fiscal 2025.
Analysts have an average “Strong Buy” rating on Super Micro Computer, with a mean price target of $360.43 - signaling a potential upside of 24% to current levels. Out of the 7 analysts covering this stock, 5 have a “Strong Buy” rating and 2 have a “Hold” rating.
Wix.com
Wix.com (WIX) is a website creation platform that allows its users to create their sites without any coding or designing skills. It offers complete solutions from advanced SEO and marketing tools to enterprise-grade and business features, allowing everyone to build a professional website.
Earlier this month, Wix released its AI chatbot, which will help its users the moment they join Wix by asking them a series of questions to collect information regarding their business intent and help them curate their site.
Wix’s stock has been range-bound most of the year, but is up 27% in 2023 to outpace the S&P 500 Index ($SPX).
The Israel-based company reported its Q3 results on Nov. 9, with revenue rising almost 14% to $393.8 million - surpassing estimates of $389.66 million. Adjusted EPS came in at a stronger-than-forecast $1.10 per share. Wix also raised its outlook for Q4, with revenue guidance of $400 million to $405 million again arriving above the consensus.
Meanwhile, analysts are targeting 110% EPS growth for fiscal 2023, followed by 86% growth in the next fiscal year.
Analysts have an average “Strong Buy” rating for WIX, with a mean price target of $120.35 - indicating a potential upside of 22% to current levels. Out of the 17 analysts currently covering the stock, 12 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 3 have a “Hold” rating.
