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The market pullback since mid-July has hit growth stocks hard, but corrections often provide buying opportunities. Although some economic slowdown hurdles have been provided to the market, a number of growth stocks remain strong due to their fundamentals. So long as the economy doesn't completely implode, it's likely that choice growth stocks will continue to outperform, and move higher over the long-term.
As with any investment, those considering specific growth stocks have to weigh potential risks against rewards. Finding growth stocks that fit within an individual investor's risk profile is impossible to do in a piece like this, considering every individual is different. But for most portfolios with a growth tilt, these three picks should do well over the long-term.
These stocks have revenue growth profiles that should lead to strong earnings and cash flow growth over time. Given that stock prices are generally derivatives of long-term cash flow expectations, that should bode well for those with a long-term investing mindset.
Without further ado, let's dive into why these three stocks may be worth a deeper dive right now.
Key Points About This Article:
- Recession concerns are building in the market, making stock picking, particularly among growth stocks, a difficult task.
- That said, there are some growth stocks Wall Street analysts remain very bullish on - here are three investors may want to consider.
- 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.
DraftKings (DKNG)
A DraftKings banner placed across a sports book at a casino
In March, online betting and casino company DraftKings ( NASDAQ:DKNG ) stock reached $50 per share. That boom quickly ended, with the stock suddenly dropping to $30, as the company's performance on the growth front appeared to slow. DraftKings recent Q2 results could be considered a mixed bag, with the company reporting $1.10 billion revenue (missing the consensus $1.12 billion estimate), but with stronger-than-expected growth.
Adjusted earning per share did beat estimates, reaching $0.22. And although DraftKings raised its 2024 revenue guidance to $5.15 billion, the company also lowered EBITDA guidance to $380 million. Some investors are moving away from DKNG stock on this news, but other investors think it’s a long-term bet worth making. That's because DraftKings remains appealing as an online sports betting play, given growth in this sector is expected to average more than 10% annually for the foreseeable future. Additional state approvals should drive user and profitability growth. And with DraftKings now operating in 26 U.S. states, many investors expect outsized growth as more states legalize online betting.
Despite recession fears potentially slowing iGaming and online sports betting, the online sports betting market remains promising. As more states legalize gaming, DraftKings looks well-positioned to ride this wave toward future profit growth, with projected EBITDA of $380 million in 2024 and $950 million the following year paving the way for further growth in global markets long-term.
Alphabet (GOOG)
A bunch of letters spewed across a kid's table
As one of the biggest companies in the search and online advertising sectors, Alphabet ( NASDAQ:GOOG ) saw a 17% year-to-date stock increase this year. Over the past five years, this number is even more impressive at 178%. Trading at just 24-times earnings with a 0.49% dividend yield, GOOG stock is one of the few mega-cap tech names many investors still consider to be extremely undervalued.
Indeed, given the company's impressive 14% revenue growth in the past year and 27.9% net profit growth in Q2, the stock is really trading at a price-earnings to earnings growth metric of around 1. That's reasonable for any stock. But for a company like Alphabet, a dominant player in the high-growth cloud world as well, this is a valuation that should be enticing to many.
Indeed, Google Cloud contributed over 10% of total revenue and grew faster than advertising. As the third-largest cloud provider, Alphabet appears set to gain more market share.
Google Cloud significantly boosted Alphabet's revenue and profitability, surpassing $10 billion in revenue for the first time with a 29% year-over-year increase, driven by AI tools like Gemini and Trillium. Growth in the company's data centers and infrastructure divisions improved margins, with operating margins rising to 11.3% from 4.9%. Over six consecutive quarters, Google Cloud's margin growth enhanced Alphabet's overall margins, raising the total operating margin to 32% and increasing EPS by over 31%.
Wall Street analysts currently rate GOOG stock as a Strong Buy, with 32 Buys and 7 Holds put in place over the past three months. The stock's average target price of $205.08 indicates more than 20% potential upside from here.
Celsius Holdings (CELH)
An assortment of energy drinks
Energy drink company Celsius Holdings ( NASDAQ:CELH ) saw its revenue rise to $1.5 million from $75.1 million five years ago. Although the stock declined to nearly $40 per share, the stock has recently recovered and is trading at a reasonable price with future growth potential.
Celsius saw its stock price halve from its highs since late May. The company’s previous success was driven by unique flavors, no-sugar options, and a distribution deal with PepsiCo, which expanded its retail reach. Despite impressive revenue growth over the past three years, the pace of growth has slowed as the company became fully distributed in the U.S. Celsius' Q1 revenue grew by 37% , down from 95% in Q4, and Nielsen data suggests a further slowdown to 13% growth by late June is most likely.
While some doubt Celsius can maintain its growth, its aggressive international expansion suggests continued strong performance. Forecasts predict 23.1% earnings growth next year and 44.2% by 2026, making CELH a potential buy on the dip for those looking for big potential future gains.
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