The beginning of the year is the best time to accumulate quality growth stocks which can do wonders for a portfolio. However, the markets continue to provide attractive opportunities. Investors should brush aside any potential setbacks or missed opportunities of 2023 and focus on building a strong portfolio for next year.
Truthfully, macroeconomic conditions will be challenging. It’s blue-chip stocks that will remain in focus as investors seek capital protection and regular cash flows through dividends. However, at least 30% to 40% exposure to fundamentally strong growth stocks can be considered.
In a big economy, certain sectors will perform well, even if the broader economy faces challenges. Therefore, investors need to spot quality growth companies in these sectors for potential multibagger returns.
So, let’s discuss three growth stocks to buy that represent companies likely to deliver stellar financial performance.
DraftKings (DKNG)
DraftKings (NASDAQ:DKNG) stock has skyrocketed by almost 250% for year to date (YTD). However, the stock has been trading at deeply oversold levels, and the rally does not imply that the upside will be capped in 2024. Backed by positive financial metrics, DKNG stock can double from current levels by the end of next year.
First, the total market for iGaming and online sports betting is expected to swell to $30 billion in 2028, compare to $20 billion this year. And these numbers only represent the existing states of active DraftKings status. The wider, addressable market will ensure a robust revenue growth trajectory.
Second, profitably is a key earmark. DraftKings has been reporting stellar revenue growth. However, the company remained loss-making at an EBITDA level. For the current year, DraftKings has guided for EBITDA loss of $105 million (mid-range). But, for 2024, DraftKings expects positive adjusted EBITDA of $350 to $450 million. As the margin expands, DKNG stock is likely to trend higher. And, given the large market size, operating leverage will ensure that margin expansion sustains beyond 2024.
Riot Platforms (RIOT)
Riot Platforms (NASDAQ:RIOT) stock has provided an excellent entry point at $10.5 after a significant correction in the last four months. Further, with Bitcoin (BTC-USD) trending higher, RIOT stock is likely to double or triple next year.
Investors are bullish on RIOT for two reasons. First, the Bitcoin miner has strong fundamentals with zero debt and a cash buffer (including value of digital assets) of $488 million. With high financial flexibility, Riot is positioned to make big investments for growth.
Second, Riot has already guided for multi-fold growth in hash rate capacity. As of Q3 2023, the company’s deployed capacity was 10.9EH/s. Riot expects to boost capacity to 36.3EH/s by 2025. With a tripling of capacity, the company is positioned for strong revenue and cash flow growth. Thus, growth metrics will be magnified if Bitcoin surges higher next year after the halving event.
Li Auto (LI)
Don’t miss the big rally that’s impending in Li Auto (NASDAQ:LI) as it delivers solid numbers. The Chinese electric vehicle manufacturer has continued to report stellar deliveries growth. Backed by introduction of new models, it is coupled with aggressive retail network expansion.
Furthermore, the growth momentum is likely to sustain in 2024 due to two factors. First, Li Auto remains focused on China. And with a cash buffer of $12.13 billion, aggressive retail network expansion will continue.
Second, Li Auto has unveiled LI MEGA. Within two hours, the company has reported more than 10,000 bookings. The commercial deliveries for the model will commence in February 2024, which will help maintaining growth momentum.
In addition, Li Auto reported free cash flow of $1.8 billion for Q3 2023. This would imply an annualized FCF potential of $7.2 billion. As the company’s financial flexibility remains sturdy, investment in innovation will provide an edge in a competitive industry.
On the date of publication, Faisal Humayun did not hold (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.
