Even with multiple concerns related to the global economy, the outlook for equities remains optimistic in 2024.
And if the broad markets lean sideways, certain sectors or themes will create value. After a big correction in 2022, not all growth stocks have recovered in the current year. Multiple undervalued growth stocks can become value creators in the coming year.
Of course, with a cautious outlook for the markets, it’s best to remain overweight on blue-chip stocks and investment grade corporate bonds. However, it does make sense to consider at least 30% exposure to quality growth stocks.
These three undervalued growth stocks to buy are worth holding for the next five years. Let’s discuss the medium-term catalysts that back the positive view.
Riot Platforms (RIOT)
Riot Platforms (NASDAQ:RIOT) is among the most undervalued growth stocks to buy from the Bitcoin (BTC-USD) mining sector. It has trended higher again on hopes of approval for an exchange traded fund. Further, with Bitcoin halving due in 2024, the outlook for the cryptocurrency is positive.
The first reason to be bullish on RIOT stock is strong fundamentals. As of Q2 2023, the company reported cash and digital assets of $510 million. With a zero-debt balance sheet, Riot has high financial flexibility to pursue aggressive expansion.
Riot already has big expansion plans. As of Q2 2023, the company reported mining capacity of 10.7EH/s. It’s expected that capacity will expand to 20.1EH/s by Q2 2024.
Riot has further guided for hash rate of 35EH/s in 2025. If this expansion is coupled with Bitcoin trending higher, the RIOT is positioned for stellar revenue and cash flow growth. Therefore, it wouldn’t be surprising if the stock doubles or triples from current levels by the end of 2024.
Li Auto (LI)
Li Auto (NASDAQ:LI) had touched highs of $47.3 earlier this year. With a meaningful correction of LI stock trading at $33.5, it appears undervalued considering growth outlook and is poised to double by the end of 2024.
Specifically, Li Auto reported deliveries growth of 296.3% on a year-on-year (YOY) basis for Q3 2023. The reason for robust deliveries includes new models launched in the last 12 months. Additionally, aggressive retail expansion within China has yielded positive results.
Notably, the company expects to launch Li MEGA in December. Li Auto believes that the model can potentially be the best-selling car in China that’s priced at more than 500,000 yuan. Therefore, deliveries growth will remain strong in the coming year.
From a financial perspective, LI has been reporting healthy vehicle margin. Further, the company has a robust cash buffer of $10.17 billion as of Q2 2023. With positive free cash flows, financial flexibility will remain high for investment in research and development.
Albemarle Corporation (ALB)
Albemarle Corporation (NYSE:ALB) is another name among the most undervalued stocks to buy. Currently, ALB stock trades at a forward price-earnings ratio of 6.4. Further, the stock offers a dividend yield of 0.98%.
For the current year, Albemarle Corporation has guided for robust revenue growth in the range of 40% to 55%. This is significant because lithium price has trended significantly lower. Even beyond this period, Albemarle has ambitious growth plans.
The company reported lithium conversion capacity of 200ktpa in 2022. It is expected that capacity will triple to 600ktpa by 2027, translating into lithium sales volume growth at a CAGR of 20% to 30% through 2027. Thus, if lithium trends higher, Albemarle will be positioned for stellar revenue and cash flow upside.
With Albemarle owning a robust balance sheet, growth financing is not a concern. Once sentiments reverse for lithium, ALB stock seems poised to quickly double.
On the date of publication, Faisal Humayun did not hold (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.