Growth stocks in rapidly evolving sectors with promising outlooks, such as technology, artificial intelligence (AI), healthcare, cannabis, or renewable energy, have the potential to multiply a small investment into millions.
When investing in growth stocks, using a buy-and-hold strategy for several years could help you earn compound returns.
Contrary to popular opinion, you do not need a large sum of money to get started in the stock market. Investing in growth stocks under $200 can also be a profitable strategy, provided they are the right stocks. Here are three growth stocks to buy right now.
Growth Stock No. 1: Amazon
After dominating the e-commerce market, Amazon (AMZN) has rapidly expanded into entertainment and cloud computing. Its cloud computing segment, Amazon Web Services (AWS), is now ranked third in the global cloud computing market, trailing only Microsoft (MSFT) and Alphabet (GOOGL).
Trading at $186 per share, AMZN stock is up 23% year-to-date, outpacing the S&P 500 Index’s ($SPX) gain of 9.8%.
With AI incorporated across its suite of enterprise products, the company has been experiencing hyper-growth in recent quarters. In the first quarter of 2024, AWS sales surged by 17% year over year to $25 billion. Net sales increased 13% to $143.3 billion. Net earnings per share (EPS) increased 216% year on year to $0.98 in the quarter.
The company has a strong free cash flow balance of $50.1 billion and a cash balance (cash, cash equivalents, and restricted cash) of $54 billion on its balance sheet. A healthy financial position will enable the company to continue funding AI projects.
Both revenue and earnings exceeded consensus estimates. Over the last three months, analysts have revised Amazon's revenue estimates upwards 14 times and earnings estimates 44 times. The increase in estimate revisions is a positive sign that analysts believe in the company's growth strategies.
Here's what analysts project from Amazon over the next two years:
• In 2024, earnings are expected to increase by 56.02% and revenue by 11.1%.
• In 2025, earnings are expected to increase by 26.17% and revenue by 11.2%.
AMZN's valuation appears to be high, at 41 times forward 2024 earnings estimates. However, given its future growth prospects in AI and cloud computing, the premium may be justified.
On Wall Street, Amazon stock is a “strong buy.” Of the 46 analysts covering AMZN, 42 rate it a “strong buy,” three analysts recommend a “moderate buy,” and one suggests a “hold.” The average price target stands at $218.70, which implies about 16.6% potential upside from current levels. Furthermore, the Street-high target price is $246, which indicates an upside of 31.2% in the next 12 months.
Growth Stock No. 2: The Trade Desk
As the advertising industry undergoes a digital transformation, investors are increasingly looking to companies like The Trade Desk (TTD), which provides a technological platform for advertising.
The Trade Desk went public in September 2016. Since then, the stock has risen dramatically, driven by the company's strong financial performance and position in the digital advertising technology market.
The stock has gained an impressive 346.8% in the last five years, thanks to its remarkable revenue growth from $477.3 million in 2018 to $1.9 billion in 2023.
Trade Desk’s stock is up 19.2% YTD, outpacing the broader market's gain.
The platform supports a wide range of ad formats and channels, such as display, video, audio, mobile, and connected TV (CTV). Trade Desk has collaborated with Disney (DIS), Roku (ROKU), and NBCUniversal to help these premium brands confidently engage their audiences.
In its first quarter of 2024, total revenue jumped 28% year over year to $491 million, while adjusted EPS grew from $0.23 in the year-ago quarter to $0.26. The company emphasized that its customer retention rate remained at 95% during the quarter, as it has for the past decade.
What's more, during the quarter, the company worked with various media agencies around the world to implement Unified ID 2.0 (UID2), an upgraded alternative to third-party cookies.
Driven by these efforts, management anticipates a 24% increase in second-quarter revenue to $575 million, slightly less than the consensus estimate of $576.96 million.
While Trade Desk did not provide full-year guidance, analysts predict a 24% increase in revenue and a 21.8% increase in earnings by 2024. Furthermore, revenue and earnings are projected to rise by 19.4% and 18.5%, respectively, in 2025.
On Wall Street, Trade Desk stock is considered a “strong buy.” Of the 26 analysts covering TTD, 20 rate it a "strong buy," two recommend a "moderate buy," three recommend a "hold," and one recommends a "strong sell." The average price target is $95.13, implying 10.7% potential upside from current levels. Furthermore, the Street's high target price of $110 implies a 28% gain over the next year.
Trade Desk appears to be expensive, trading at 57 times forward earnings estimates for 2024. However, the premium may be justified, given the rapid growth of the digital advertising industry.
Growth Stock No. 3: Confluent
Confluent (CFLT), a data streaming provider co-founded by the creators of Apache Kafka, is the third growth stock on my list, currently trading at around $29 per share. The AI era has resulted in increased demand for real-time data solutions, boosting Confluent's platform growth.
This demand resulted in another strong quarter, pushing the stock to a 30.6% year-to-date gain, well ahead of the broader market.
In its recent first quarter, total revenue increased by 25% to $217.2 million. Subscription revenue grew 29% from the year-ago quarter. While the company has not reported profitability in consecutive quarters, the first quarter profit of $0.05 per share was better than the previous year's quarter’s loss of $0.09 per share.
Talking about the long term, CFO Rohan Sivaram stated, “While streaming remains the largest driver of our cloud business with continued strong growth, our DSP products which include connect, process, and govern have shown substantially faster growth. This puts us in a stronger position to drive durable and efficient growth in the years ahead.”
Confluent expects total revenue growth of 23.3% in fiscal 2024 to $957 million, with subscription revenue accounting for 95% of that growth. By comparison, analysts predict revenue growth of 23.4% in fiscal 2024 and 24.5% in fiscal 2025. From just $0.04 in fiscal 2023, analysts forecast adjusted profits to grow to $0.21 per share in fiscal 2024, further increasing to $0.34 by fiscal 2025.
On Wall Street, Confluent stock is a “moderate buy.” Of the 28 analysts that cover the stock, 18 suggest it is a “strong buy,” two recommend a “moderate buy,” seven say it is a "hold,” and one suggests a “moderate sell.” The average target price of $33.92 is 10.7% above current levels. The Street-high target price of $40 implies an upside of 30.5% in the next 12 months.
