Growth stocks in rapidly evolving industries frequently have the potential to maximize long-term shareholder returns. These hot growth stocks, in particular, have been market favorites for more than a decade. They have displayed strong revenue and earnings growth, frequently outpacing the broader market. Furthermore, their formidable reputation, diverse portfolio, and bold vision for the future with artificial intelligence (AI) make them growth powerhouses stocks for the long term.
#1. Meta Platforms
With a market cap of $1.4 trillion, Meta Platforms (META) is the dominant force in the technology sector. It is the parent company of Facebook, Instagram, WhatsApp, and the Oculus VR platform. Meta had a strong third quarter, exceeding consensus revenue and earnings expectations.
Meta’s stock has surged 59.3% year-to-date, outperforming the tech-heavy Nasdaq Composite’s ($NASX) gain of 21.8%.
Meta experienced rapid growth in both of its key operating segments during the second quarter as a result of AI integration. In the Family of Apps (FoA) segment (which includes all social media apps), revenue rose 22% year on year to $38.7 billion. Operating income increased by 47% in Q2.
The integration of AI is improving the Reality Labs (RL) segment, which has previously struggled. Although the RL segment accounts for a small portion of total revenue, its revenue increased by 27.9%. Nonetheless, it reported an operating loss of $4.48 billion. Management believes that its investments in AI for the RL segment will pay off in the long run.
Total revenue in Q2 stood at $39.07 billion, an increase of 22% year-over-year. Net income also increased by 73%, reaching $5.16 per share. Meta's cash balance totaled $58.08 billion at the end of the quarter with $10.9 billion in free cash flow, a good financial position to continue investing in AI.
CEO Mark Zuckerberg stated that “Meta AI is on track to be the most used AI assistant in the world by the end of the year.”
Analysts predict that Meta's revenue and earnings will grow by 19.9% and 43.9%, respectively, in 2024. Revenue and earnings are expected to grow 14.2% and 14.9%, respectively, in 2025. Meta, trading at 23 times forward 2025 earnings, appears to be a reasonable hyper-growth AI stock to buy right now.
What Does Wall Street Say About Meta Stock?
Overall, on Wall Street, META stock has a "strong buy” rating. Of the 48 analysts who cover META, 41 recommend it as a "strong buy," one as a "moderate buy," four suggest a "hold," and two rate it a “strong sell.”
The mean price target for Meta stock of $617.65 is 9.6% higher than current levels. Its high target price of $811 indicates an upside of 43.9% over the next 12 months.
#2. Amazon
Amazon (AMZN) has long been regarded as a technological and consumer powerhouse. The company is well-known for its leadership in e-commerce and cloud computing via Amazon Web Services (AWS). However, Amazon has expanded into a number of other high-growth areas, including streaming, AI, and logistics.
Valued at $1.47 trillion, Amazon’s stock has gained 21.6% year-to-date, compared to the S&P 500 Index’s ($SPX) gain of 21.5%.
Amazon's e-commerce platform remains the world's largest, accounting for a sizable portion of total online retail sales. The company has constantly innovated its shopping experience by improving logistics, and providing fast delivery. Furthermore, it also offers a robust Prime membership program that includes access to exclusive content on Prime Video, membership deals, and other benefits for Prime members.
While its e-commerce business dominates the retail industry, AWS remains the largest cloud infrastructure provider, with a market share of around 32%, far outpacing its closest competitors, Microsoft Azure and Google Cloud. As more businesses migrate to the cloud, AWS is poised to capture a sizable portion of this growing market.
Amazon has been an early adopter of AI technologies across its business lines. In the second quarter, AWS generated $26.3 billion in sales, an increase of 19% year-over-year. Its financials reflect a company in growth mode, with strong revenue generation across all business segments. Total revenue increased by 10% to $148 billion, while earnings per share jumped 93.8% to $1.26.
It has also expanded into healthcare, entertainment, and self-driving vehicles to diversify its business operations. Its large cash balance of $73.3 billion and free cash flow balance of $53 billion have enabled the company to invest in future growth.
Amazon made numerous AWS agreements with companies such as Eli Lilly (LLY), GE HealthCare (GEHC), ServiceNow (NOW), and others during the quarter, which will help boost AWS's sales in the coming years. Despite the fierce competition in the technology sector, Amazon's ability to innovate and adapt to changing market conditions keeps it a desirable stock for long-term investors.
Analysts predict that earnings will increase by 62.8% in 2024 and 22.8% in 2025, respectively. Trading at 32 times forward 2025 earnings, the stock may be a little pricey. However, given its strong financials, increasing market share in high-margin businesses such as AWS and advertising, and continued expansion into new industries, Amazon is expected to remain a dominant force for many years to come.
Out of 48 analysts covering the stock, 44 have a “strong buy” rating, while three recommend a “moderate buy” and one rates AMZN a “hold.” Its mean target price is $225.98, which implies an upside potential of 22.3% from current levels.
Furthermore, the high target price of $265 suggests that the stock could rally as much as 43% over the next 12 months.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
