2023 can be regarded as the dynamic one for the overall stock market. In 1H, S&P 500 delivered a strong gain of ~16.4%, as an ~8% increase in 2Q challenged bearish market sentiments. However, 3Q gave less favorable scenario for entire market as there were concerns about inflationary pressures and the US Fed continued its rate-hiking campaign. Even though July saw an increase of ~3.11%, August and September months mitigated that impact as these 2 months saw declines of ~1.7% and ~4.87%, respectively. Overall, in 3Q, decline for S&P 500 came in at ~3.65%. With October month seeing an additional ~2.2% decline, as at November 22, there was a recovery with month-to-date rise of ~7.52%. With recovery underway, investors should now target best growth stocks for long-term.
Bloomberg report suggests that Bank of America expects S&P 500 index ascending ~10% from the levels seen on 20th November 20 by 2024 end, touching a record high of ~5,000. Per the report, 2024 will be a game changer for the stock pickers. Conversely, Goldman Sachs sees a marginal growth for the overall US economy over coming year and the investment management firm doesn’t expect a recession. It expects that S&P 500 index should touch ~4,700 levels by 2024 end, exhibiting a 5% gain in upcoming 12 months. Therefore, this is the apt time to go long on best growth stocks for long-term.
While considering stock selection for the purposes of long-term, a popular and renowned strategy which global investors target consists of purchasing growth stocks. More often than not, growth stocks can be targeted by considering stock prices commanding strong premium over their respective EPS figures, given that the company is profitable.
With this in mind, we will now have a look at best growth stocks for long-term to buy at current levels.
1. Palantir Technologies Inc.
The company is engaged in providing companies with solutions so that they can manage large disparate data combinations to gain valuable insights and support operational outcomes.
It has released its results for 3Q ended September 30, 2023, in which it saw GAAP net income of $72 million, exhibiting a margin of ~13% and GAAP income from operations of $40 million, which exhibits margin of ~7%. On the year-over-year basis, the company’s revenue saw an increase of 17% to $558 million, with commercial revenue growing 23% to $251 million. Government revenue of the company saw an increase of 12% year-over-year to $308 million and adjusted income from operations came at $163 million, which represents a margin of 29%.
For 4Q23, the company expects revenue of between $599 million – $603 million and adjusted income from operations of $184 million – $188 million. For FY23, the company has raised its revenue guidance to between $2.216 billion – $2.220 billion. Apart from this, it has increased its adjusted income from operations guidance to between $607 million – $611 million.
TheStreet upgraded the company’s shares “d” rating to a “c-” rating in their research note dated September 29th. Analysts at Wolfe Research initiated a coverage on the company’s stock and raised their price objective from $6.00 to $7.50, giving the company an “underperform” rating on 8th August. HSBC initiated coverage on the company’s shares and they issued a “hold” rating, with the price objective of $16.00 on the stock.
2. The Trade Desk, Inc.
It is a technology company which, with the help of its self-service, cloud-based platform, creates and manages the data-driven digital advertising campaigns, consisting display, video, audio, on the range of devices like computers, mobile devices, etc.
It announced its financial results for 3Q ended September 30, 2023, in which it delivered revenue of $493 million, resulting in the growth of 25%. Performance of the company was supported by premium which advertisers continue to place on precision, agility and transparency in a bid to maximize returns.
Its customer retention was over ~95% during the third quarter, and the company is in a strong position to capture greater share of $1 trillion advertising TAM. It repurchased $90 million of its Class A common stock in 3Q23. As of September 30, 2023, the company had $273 million available for repurchases which was also authorized.
For 4Q23, the company expects revenue at least $580 million and adjusted EBITDA of ~$270 million.
3. DexCom, Inc.
The company is in the business of designing and commercializing continuous glucose monitoring systems for diabetics.
In 3Q23, the company saw its revenue grow by ~27% versus the same quarter of the previous year to $975.0 million on reported basis and 26% on an organic basis. U.S. revenue growth came in at ~24% and international revenue growth was at ~33%, both on reported basis. International revenue growth came in at ~30% on an organic basis.
GAAP operating income of the company came in at $205.5 million or 21.1% of revenue, which exhibits a rise of 190 bps in comparison to 3Q22. Non-GAAP operating income of the company was at $238.9 million or 24.5% of reported revenue. The company has received regulatory clearance of Dexcom G7 in Canada, and it has successfully launched this in Canadian market.
Given the continued momentum, the company raised its full-year revenue and margin guidance. It expects its revenue of ~$3.575 billion – 3.600 billion (which equates to the 23-24% growth) and it anticipates a non-GAAP gross profit margin of ~64%. The company expects adjusted EBITDA margin of ~28%.
It has announced its $500 million share repurchase program.
Conclusion
While above are some of the best growth stocks for long-term to buy at current levels, there are several other stocks which are expected to increase from their current share prices. Some of them include, MercadoLibre, Inc., Adobe Inc., Tesla, Inc., etc.
While purchasing best growth stocks for long-term, investors should know that a high P/E ratio, in comparison to the industry benchmarks, exhibits that potential investors want to pay more for the stock than its present earnings justify. Underlying assumption is that the company’s stock should see future growth, which further validates its high price.
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