Growth stocks are on a tear this year, and while some names will inevitably cool off in the coming weeks, opportunities will always exist. In my opinion, investors should start taking profits from growth stocks trading above their intrinsic value, reinvesting into high-growth companies that trade with a large margin of safety. Once Wall Street’s honeymoon period with AI starts to fade, many up-and-coming companies will begin to see capital inflows, and are likely to also see remarkable recoveries to new highs.
Of course, there are two things to consider here. First, not all undervalued growth stocks will be winners in the long run. But Wall Street analyst expectations and growth projections are very good indicators that will help you pinpoint the likely winners. Second, these growth stocks have a large margin of safety but obviously aren’t as risk-free as, say, McDonalds (NYSE:MCD). You should always hold such stocks alongside your safer bets to amplify your gains.
With that said, here’s my curated list of growth stocks to buy now.
Luminar Technologies (LAZR)
This pick might create some controversy due to the lack of profitability, and the growth-at-any-cost mentality the company has shown at times. That said, I believe this business is poised to succeed in the long run.
Luminar Technologies (NASDAQ:LAZR) is a leader in LiDAR technology. This tech can be used in self-driving cars and offers better specifications than radar and camera technology, which is what most self-driving cars currently use. LiDAR is an expensive technology often criticized for being too costly and impractical for mass adoption. Many think that LiDAR won’t gain popularity due to its price, and this would negatively impact LAZR stock, but I beg to differ.
The cost of LiDAR is its main and, arguably, its only issue. What makes me optimistic is that price has continued to decline substantially over the years. Indeed, LiDAR tech costs a fraction of what it did just five years ago. Thus, given the fact that Luminar Technologies is the leading company here, I expect it to soar as the company continues to innovate and reduce costs.
The company has already secured partnerships with major automakers like Volvo (OTCMKTS:VLVLY), Daimler, Toyota (NYSE:TM), and Hyundai. It also expects to achieve a positive gross margin by year-end and double its revenue. Analysts expect more than 200% year-over-year sales growth next year.
Wall Street analysts are also bullish on LAZR, with an average price target of $13, implying 75.2% upside from its current levels.
PlayAGS (AGS)
The rise of gambling in recent years has taken many sin stocks to new highs, especially after the post-pandemic travel boom. PlayAGS (NYSE:AGS) is one of the companies that stand to benefit from this trend, as it designs and supplies gaming products and services for the gaming industry in the U.S. and internationally.
The company operates in three segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games (Interactive). The EGM segment offers various video slot titles and EGM cabinets for casinos, while the Table Products segment provides electronic table games, card shufflers, chip sorters, and other accessories. The company’s Interactive segment offers online social casino games and real-money gaming platforms.
PlayAGS has been recovering well from the pandemic-induced slump, as its year-over-year revenue growth stabilized at around 15%, increasing 13.7% year-over-year in Q1. Now, the company is losing money, but its last report highlighted a net loss of only $334,o00. Thus, so long as the company continues on its growth trend, and improves its margins over time, this is a stock with some impressive upside potential over the long-term.
This growth is being seen in the company’s price-earnings ratio of around 200-times, but analysts expect substantial net income over the next few years. If this company’s stock price remains the same, and the company meets analyst expectations, PlayAGS will carry a price-earnings ration of only 15-times in 2025. But again, this company has been beating earnings estimates by massive margins, and I see it being even more profitable in that timeframe.
The average price target for AGS stock is $41.25, implying 514.75% upside potential.
STAAR Surgical (STAA)
STAAR Surgical (NASDAQ:STAA) is a company that designs, develops, manufactures, markets, and sells implantable lenses for the eye and companion delivery systems to deliver the lenses into the eye. The company provides Visian implantable Collamer lens product family (ICLs) to treat visual disorders such as myopia (nearsightedness), hyperopia (farsightedness), astigmatism, and presbyopia. It also offers preloaded silicone cataract intraocular lenses and injector systems for use in cataract surgery.
STAAR Surgical is a profitable company with meager debt and high growth potential. The company reported revenue of $73.5 million in the first quarter of 2023, up 16% year-over-year. Its net income was $2.7 million, compared to $9.4 million in the same quarter of 2022. The company attributed the lower net income to higher operating expenses related to its growth initiatives and investments in infrastructure. However, the company expects to see a strong rebound in the second half of 2023 as it benefits from the increasing demand for its products, especially in China and Japan.
Analysts expect STAAR Surgical to double its earnings per share from 2023 to 2025. Additionally, the company’s annual revenue growth is expected to average 23% over the next five years. The average price target for STAA stock is $67, implying 28% upside from its current price. If you compare it to some of the other stocks on this list, that might look underwhelming, but that still represents excellent upside potential in this environment.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
