The search for high-growth stocks isn’t dead. In fact, this year has seen a resurgence in such stocks, prompting many investors to reinvigorate their quest for growth.
Interest rates are still high. And the Federal Reserve appears to be intent on keeping interest rates elevated for some time.
However, growth stocks are already seeing buying activity pick up in anticipation of rate cuts on the horizon. Indeed, if we see the sort of cuts materialize that the market is pricing in, many growth investors may kick themselves a few years down the road for failing to buy the 2022 dip. We’re seeing high-growth stocks such as Tesla (NASDAQ:TSLA) surging as investors flock back to this sector.
Accordingly, the question is where to get started for investors looking for Tesla-beating returns. I think these three high-growth stocks are a great place to start doing some buying. Or, they’re at least worth putting on the watch list right now. In either case, aggressive investors will want to watch these companies as the market turns over.
First on this list of high-growth stocks to buy is CrowdStrike (NASDAQ:CRWD), a leading supplier of cloud-based cybersecurity services. The company has gained a strong position in a crucial industry, with over 21,000 customers paying over $2.3 billion yearly for its products.
In the last six months, CrowdStrike’s stock has fallen by more than 40%. Concerns have arisen about the company’s growth slowing down in 2023, as noted in Deutsche Bank’s Zelnick’s downgrade. CrowdStrike’s Q3 results also prompted a decline in stock value. The company usually experiences growth in its ARR (Annual Recurring Revenue) during the third and fourth quarters, which aligns with enterprise budgets. However, in 2022, the company did not see the typical boost in those quarters, making investors uneasy about the company’s prospects in 2023.
Although the business doesn’t generate profits according to GAAP, it can generate a significant amount of free cash flow. In Q3 of fiscal 2023, CrowdStrike produced $174 million in free cash flow from $581 million of revenue with a 30% margin. If this margin is sustained throughout the year, it is projected by Wall Street that CrowdStrike could generate $888 million in free cash flow in fiscal 2024.
Currently, CrowdStrike Holdings is undervalued and presents a promising buying opportunity since my valuation has determined the intrinsic value for the stock to be $149.49, which is higher than the current market value. Additionally, the company’s stock price is quite volatile, which provides more opportunities to purchase shares in the future if prices go down or if it rises. The high beta of the stock is a good measure of how much the stock moves in comparison to the market.
Effective communication with customers is crucial for any thriving business. Twilio (NYSE:TWLO) is among the high-growth stocks that are worth considering in this regard. The company enables companies of all sizes to achieve this through its APIs (application programming interfaces). These interfaces enable even those who need more tech-savvy to program automated text messages or personalized marketing emails.
The company has pursued numerous acquisitions to establish itself as the primary customer communication and engagement solution. This has been a balancing act, as Twilio has yet to record any profits since going public. However, management is optimistic about achieving adjusted operating profitability by 2023, which is a positive indication.
In the company’s recent news flow, headlines that Twilio is reducing its workforce by approximately 17% in a second round of layoffs since September has bolstered its stock. That’s because this action is part of a more significant restructuring effort and should lead to significant efficiency gains. Although this is a difficult day for the affected employees, many investors like this move as the company move toward becoming a profit-generating machine.
Last on this list of high-growth stocks to buy is none other than MercadoLibre (NASDAQ:MELI).
Despite the difficulties experienced by domestic e-commerce operators, Latin American e-commerce firm MercadoLibre has stood out in the industry in terms of its impressive growth.
This growth has been driven by MercadoLibre’s focus on developing a collection of competitive advantages using various businesses such as e-commerce, MercadoPago for payments, and MercadoEnvios for logistics. Additionally, it has a lending business known as MercadoCredito and an asset management division.
MercadoLibre Inc has a Long-Term Technical rank of 66, indicating that its trading performance over the last 200 days has placed the company in the top half of stocks, with only 34% of the market scoring higher. Within the Retail Internet industry, which is ranked 117 based on this metric, MELI outperforms 117% of stocks.
MercadoLibre is experiencing a quick rise in profitability, primarily attributed to the growth of its advertising business. In Q3, the company achieved a record-breaking operating margin of 11%. Additionally, one of MercadoLibre’s primary competitors, Americanas S.A., is facing an accounting scandal that could open MercadoLibre to gaining a larger market share. Thus, there’s a lot to like about this Latin American player in a high-growth market.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Cloud, Communications, Cybersecurity, Consumer Discretionary, Retail, E-Commerce, Software, Technology