Since the emergence of artificial intelligence (AI), the market has dramatically shifted towards technology and growth stocks. These companies are at the forefront of innovation, leading the charge with cutting-edge technologies and showcasing strong growth prospects.
With investors on the hunt for the next Nvidia-style multibagger, growth stocks stand out as appealing choices for investors looking to capitalize on potential high-reward opportunities - who don’t mind the trade-off of higher risk, as well. These three stocks - Zscaler, Inc. (ZS), Nutanix, Inc. (NTNX), and RxSight, Inc. (RXST) - are all ramping up their own tech investments, making them ideal growth candidates.
Plus, Wall Street analysts are bullish, predicting double-digit upside potential for these three names in the next 12 months. Here’s a closer look.
Growth Stock #1: Zscaler
With a market cap of about $27.1 billion, San Jose-based Zscaler, Inc. (ZS) is a cybersecurity firm, focused on accelerating the digital transformation by enhancing its clients' agility, efficiency, resilience, and security. Its industry-leading Zero Trust Exchange platform, the world's largest online cloud security solution, safeguards thousands of customers against cyber threats and data loss, securely connecting users, devices, and applications across over 150 global data centers.
Shares of Zscaler have gained 19.8% over the past 52 weeks, but are down 19.6% on a YTD basis.
Priced at 17.24 times sales, ZS stock trades at a discount to its own five-year average valuation of 29.76x.
On May 30, the company revealed its fiscal Q3 earnings results, which sailed past Wall Street’s forecasts on both the top and bottom lines, triggering an impressive 8.5% surge in the next trading session. Its revenue of $553.2 million showed a substantial 32.1% annual improvement, supported by growing customer interest in its Zero Trust Exchange platform.
“To meet this demand, we are accelerating innovation, expanding our platform, and building a strong go-to-market team to scale our business to $5 billion and beyond in ARR,” stated CEO Jay Chaudhry.
On an adjusted basis, Zscaler earned $0.88 per share during the quarter, exceeding estimates by a notable 35.9% margin.
Furthermore, Zscaler is enhancing its AI capabilities through strategic partnerships to leverage AI's transformative potential in the cybersecurity landscape. For instance, ZS stock surged about 2% following the company’s announcement of a strategic collaboration with AI king Nvidia (NVDA) on June 11.
Zscaler plans to integrate Nvidia's AI capabilities to enrich user experiences and introduce security-focused copilot services for enterprises. Utilizing NVIDIA NIM inference microservices, NeMo Guardrails, and the Morpheus framework, Zscaler aims to strengthen data processing capabilities within its Zero Trust Exchange platform.
Looking forward to fiscal 2024, management expects revenue to range between $2.140 billion and $2.142 billion. Non-GAAP income from operations is projected between $422 million and $424 million. Also, non-GAAP EPS is anticipated to land between $2.99 and $3.01.
Zscaler stock has a consensus “Strong Buy” rating overall. Out of the 36 analysts offering recommendations for the stock, 27 recommend a “Strong Buy,” one advises a “Moderate Buy,” and the remaining eight give a “Hold” rating.
The average analyst price target of $231.88 indicates a potential upside of 29.8% from the current price levels, while the Street-high price target of $290 suggests an impressive 62.4% upside potential.
Growth Stock #2: Nutanix
Valued at $13.2 billion by market cap and headquartered in San Jose, California, Nutanix, Inc. (NTNX) is a global leader in cloud software, offering a unified platform that seamlessly runs applications and manages data across various clouds. As the pioneer of hyper-converged infrastructure, Nutanix is trusted by organizations worldwide to power their hybrid multi-cloud environments cost-effectively.
Shares of Nutanix have rallied 77.8% over the past 52 weeks, easily overshadowing the broader S&P 500 Index’s ($SPX) gain of 24.6% over the same time frame.
In terms of valuation, the stock is priced at 7.23 times sales, lower than its industry peer, Aspen Technology, Inc. (AZPN), which trades at 11.90x.
Nutanix reported its fiscal Q3 earnings results on May 29, which topped Wall Street’s projections. Its revenue of $524.6 million jumped 16.9% annually, while, adjusted EPS of $0.28 grew 250% year over year, smashing predictions by a solid 69.3%. During the quarter, the company’s free cash flow surged 48.7% annually to $78.3 million.
Reflecting on the Q3 performance, CEO Rajiv Ramaswami said, “We delivered solid third quarter results reflecting disciplined execution and the strength of our business model, Our recent announcements around modern applications, generative AI and partnerships reflect our continued focus on driving innovation and broadening our partnerships to further enhance the value proposition of Nutanix Cloud Platform.”
For fiscal 2024, management projects revenue to range between $1.12 billion and $1.13 billion, while free cash flow is expected between $520 million and $540 million. The company targets a non-GAAP gross margin of approximately 86% and a non-GAAP operating margin of around 15%.
Analysts tracking Nutanix predict the company will swing to a GAAP profit of $0.09 per share in fiscal 2024, which is expected to rise 188.9% to $0.26 in fiscal 2025.
NTNX stock has a consensus “Moderate Buy” rating overall. Out of the 14 analysts covering the stock, eight recommend a “Strong Buy,” three advise a “Moderate Buy,” and the remaining three give a “Hold” rating.
The average analyst price target of $74.92 indicates a potential upside of nearly 44% from the current price levels. The Street-high target of $80 suggests that the stock could rally as much as 53.6%.
Growth Stock #3: RxSight
Founded in 1997, California-based RxSight, Inc. (RXST) is a medical device company that develops, manufactures, and sells light adjustable intraocular lenses (LAL) for cataract surgery. This cutting-edge technology, featuring the RxSight Light Adjustable Lens and Light Delivery Device (LDD), allows doctors to fine-tune vision post-surgery, offering patients unparalleled customized visual clarity. The company’s market cap presently stands at $2.2 billion.
Shares of this medical device company have climbed almost 114% over the past 52 weeks, easily dwarfing the SPX’s gains during this period. Plus, in 2024 alone, the stock is up 37.6%, compared to the SPX’s return of about 15% on a YTD basis.
Shares of RxSight gained about 1.9% after the company announced its Q1 earnings results on May 6, which surpassed Wall Street’s expectations on both the top and bottom lines. The company reported revenue of $29.5 million, marking a substantial 69% increase compared to the previous year, and exceeded analysts’ projections by 7.1%.
This remarkable top-line growth was fueled by the sale of 20,218 LAL, a strong 92% annual surge in procedure volume, underscoring the massive demand for these lenses. During the quarter, the company narrowed its loss per share to $0.25, marking a notable improvement from $0.42 in the same period last year.
As of March 31, the company held approximately $125.4 million in cash, cash equivalents, and short-term investments. Total operating expenses for Q1 surged to $31.4 million, up 34% annually, reflecting RxSight’s ongoing strategic investments in expanding its LDD installed base and supporting LAL's growing sales volume.
For fiscal 2024, management expects revenue to range between $130 million and $137 million, reflecting anticipated growth of 48% to 54% compared to fiscal 2023. Additionally, gross margin guidance has been adjusted to a range of 68% to 70%, marking an increase of 800 to 1,000 basis points from the previous year.
Analysts tracking RxSight predict the company’s loss to narrow 44.7% year over year in fiscal 2024 and shrink another 47.4% in fiscal 2025.
RXST stock has a consensus “Strong Buy” rating overall. Out of the eight analysts offering recommendations for the stock, seven recommend a “Strong Buy,” and the remaining one gives a “Moderate Buy” rating.
The average analyst price target of $72.75 indicates a potential upside of 31.7% from the current price levels. The Street-high target of $75 implies that the stock has a 35.8% upside potential.
On the date of publication, Anushka Mukherji 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.
