The high interest rate environment over the past year and a half has been challenging for growth stocks - at least, for those that haven't been swept up in the epic artificial intelligence (AI)-fueled rally powering some of the tech sector standouts.
While the Fed's policy-tightening campaign to combat rising inflation has been a headwind for some rate-sensitive stocks, indications out of this week's meeting seem to confirm that the table is set for a full-on pivot to rate cuts in 2024 - which means the path of least resistance may be higher for growth names in the year ahead.
Against this backdrop, here's a look at three high-quality growth stocks for investors looking to gain exposure to this space.
Live Nation Entertainment
Founded in 1995, Live Nation (LYV) is a multinational entertainment company that promotes, operates, and manages ticket sales for live entertainment events globally. The California-based company is best known for producing live music concerts, selling tickets (through its subsidiary Ticketmaster, which is one of the world's leading live entertainment ticketing sales and marketing companies), and owning and operating venues. Its market cap currently stands at $20.74 billion.
Live Nation stock is up 25% on a YTD basis, edging out the roughly 21% gain in the S&P 500 Index ($SPX) over this time frame.
Live Nation's latest numbers for Q3 2023 were strong, as both revenue and earnings beat Wall Street's estimates. Revenues increased by 32% from the previous year to $8.15 billion, boosted primarily by 32% yearly growth in revenues from concerts to roughly $7 billion. Meanwhile, EPS rose 28% to $1.78, topping analysts' expectations of $1.27. In fact, the company's EPS has exceeded expectations in four out of the past five quarters.
Although LYV's net long-term debt rose to about $6.5 billion from $5.4 billion at the beginning of the year, the company has a solid cash balance of $6 billion.
Notably, Live Nation's dominance in the global live shows arena has helped boost its revenue results, even as it has drawn regulatory scrutiny - particularly for its Ticketmaster division.
Analysts don't appear to be pricing in any major regulatory hurdles, though, as Live Nation's key growth metrics are well above the sector median. With forward revenue growth and long-term EPS (3-5 years CAGR) at 54.76% and 38.50%, respectively, the entertainment giant is projected for above-average growth in the years ahead.
Overall, analysts have deemed the stock a “Strong Buy” with a mean target price of $110.78. This denotes an upside potential of about 26% from current levels. Out of 14 analysts covering the stock, 12 have a “Strong Buy” rating and 2 have a “Hold” rating.
T-Mobile US
Founded in 1994, the current iteration of T-Mobile US (TMUS) was formed by a merger with MetroPCS Communications. T-Mobile has since emerged as the third-largest wireless carrier in the U.S., with over 117 million subscribers. It provides mobile phone, Internet, and television services to its consumers, and it's a leader in the 5G space, with its network reaching 98% of all Americans.
T-Mobile's median download and upload speeds for Q3 were significantly faster than those of legacy carriers AT&T (T) and Verizon (VZ), according to Ookla test results.
The company currently commands a market cap of $185.54 billion, and recently announced its first-ever dividend in September.
Shares of T-Mobile US are up 14.7% YTD to underperform the broader market, although the stock is outperforming both AT&T and Verizon by a wide margin.
TMUS reported a mixed third quarter, as revenues fell short of estimates while EPS beat expectations. Revenues dipped 1.2% from the previous year to $19.25 billion, while EPS jumped to $1.82 from $0.40 in the previous year - comfortably outpacing the consensus estimate of $1.70, and continuing a string of bottom-line beats for TMUS.
Notably, to continue this strong run-rate of revenue growth, T-Mobile is aiming to gain a foothold in the rural American market. The company is working with a goal to reach a 20% share of these households by the end of 2025.
Further, the company also raised the low end of its free cash flow guidance range for FY 2023. TMUS now expects free cash flow of $13.4 billion to $13.6 billion for the full fiscal year, up from $13.2 billion to $13.6 billion previously.
Impressively, over the past 10 years, T-Mobile's revenue and EPS have clocked a CAGR of 13.29% and 55.80%, respectively. Moreover, the company's forward EPS growth is projected at 60.6%, much higher than the sector median of 3.84%.
Analysts have an average “Strong Buy” rating on TMUS, with a mean target price of $180.53 - indicating expected upside potential of about 12.6% from current levels. Out of 17 analysts covering the stock, 13 have a “Strong Buy” rating, 3 have a “Moderate Buy,” and 1 has a “Hold” rating.
Booking Holdings
We round out our list with Booking Holdings (BKNG), a global online travel company that operates a variety of popular brands like Booking.com, Priceline, Agoda, OpenTable, and KAYAK, among others. Founded in 1996, these brands offer a plethora of travel products and services to consumers and businesses around the world.
Notably, Booking.com is the world's leading brand for booking online accommodation reservations, based on room nights booked, occupying the number one position in the travel space. Booking dominates in the European market, and it's second only to Expedia (EXPE) in the U.S. market.
Commanding a market cap of $118.71 billion, Booking stock has rallied 69.5% on a YTD basis.
Booking reported solid Q3 earnings that beat on both the top and bottom line. Revenues were up 21% from the previous year to $7.3 billion, as gross travel bookings rose 24% to $39.8 billion. Quarterly EPS of $72.32 improved 36.4% from the prior year, and came in above the consensus estimate of $67.86. In fact, the company's EPS has topped expectations in each of the past five quarters.
The company maintains a substantial cash balance of $13.3 billion, higher than its long-term debt levels of $11.9 billion.
Booking has demonstrated consistent revenue and EPS growth over the long haul, clocking a 10-year CAGR of 12.34% and 15.13%, respectively. And looking ahead, forward revenue and EPS growth of 29.06% and 81.30% are projected to be well above their respective sector medians.
A key aspect of future growth at BKNG could stem from its AI Trip Planner, which it launched in June of this year. The aim of the planner is to let customers avoid the hassle of booking flights and hotels, making it as automatic as possible.
Overall, analysts have a “Moderate Buy” rating for BKNG with a mean target price of $3,451.45. This indicates an upside potential of roughly 8% from current levels. Out of 24 analysts covering the stock, 16 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 6 have a “Hold” rating, and 1 has a “Strong Sell” rating.
