Growth stocks rocketed in the first quarter as markets priced in Federal Reserve rate cuts. Indeed, based on history, the best growth stocks to buy in April will benefit if the Fed cuts rates.
According to Schroders, stocks have had an average return of 11% since 1928, twelve months after the Fed began rate cuts. And, if we are just in the early innings of a bull market, growth stocks could have several years of appreciation.
Further, the bull case is even stronger based on economic data. First, the unemployment rate is at 3.8%. Secondly, real wage growth has been positive over recent months, which will buoy consumer spending. Thirdly, leading economic indicators have bottomed out and U.S. manufacturing is rebounding.
So, this economic and monetary policy backdrop bodes well for these best growth stocks to buy in April. According to Finviz, the following stocks will grow earnings by 30% annually for the next five years. Therefore, expect these stocks to rally further as they outperform expectations going forward.
Shake Shack (SHAK)
Shake Shack (NYSE:SHAK) has been rallying on good news. First, in February, it reported impressive fourth quarter results that beat expectations. Total revenue was $286.2 million, growing 20% year over year (YOY). Shake Shack sales were up 2.8%, and it opened 41 new restaurants.
Another reason for the rally was the recent appointment of Rob Lynch as CEO. He has led Papa John’s International (NASDAQ:PZZA) since 2019 and brings in a wealth of experience. His marketing and operational expertise will be valuable in the next phase of Shake Shack’s expansion.
Also, the restaurant has made significant improvements in profitability. In 2023, restaurant-level operating margins improved by 240 basis points to 19.9%. Management expects more improvements through order customization, tradeups, enhanced labor deployments and supply chain optimization.
Furthermore, management expects more growth in 2024 through more Shake Shack openings. They estimate 40 licensed openings and 40 domestic company-operated openings. Given these growth catalysts, analysts are bullish. TD Cowen sees upside to $125 driven by margin improvements, minimal leverage and a new CEO.
Thus, Shake Shack has a long-term growth runway as it opens more restaurants. With increasing scale, profit margins will expand going forward.
DLocal (DLO)
Fintechs are disrupting traditional finance and winning in the process. DLocal (NASDAQ:DLO) is an upcoming player that is seeing tremendous success. It supports merchants globally in making and receiving payments efficiently and safely.
Given its growth trajectory, DLocal is one of the best growth stocks to buy in April. Over the past five years, it has grown total payment volume (TPV) 14-fold to over $17.7 billion. Today, major companies like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) are customers.
In 2023, its platform served over 600 merchants in 40 countries. TPV was up 67% YOY and revenue was $650 million, representing 55% growth. It is worth noting that most of the growth was from existing merchants as DLocal gained wallet share. Indeed, customers trust the company as exhibited by net revenue retention of 150%.
Also, management has focused on profitable growth, achieving some of the best metrics among peers. 2023 gross profit grew 37% YOY to $277 million and adjusted EBITDA was $202 million, up 32% YOY.
Looking ahead, DLocal’s prospects are very exciting. Management expects a record total payment volume in 2024, with 40% to 50% growth. They also forecast adjusted EBITDA between US$220 and US$260M, maintaining the focus on profitable growth. DLO stock is a profitable growth story that will roar higher.
Nextracker (NXT)
Nextracker (NASDAQ:NXT) is a unique way to invest in solar growth without much risk. Unlike solar panels that are heavily commoditized, Nextracker provides proprietary software and controls for large-scale solar projects. Its solar tracker solutions align solar panels with sunlight, enhancing power production.
On that note, Nextracker is in the midst of a long-term secular growth trend. As utilities retire legacy power generation assets such as coal, renewable sources like solar will fill that gap. According to the U.S. Energy Information Administration, U.S. solar power generation will grow from 163 billion kilowatt hours (kWh) in 2023 to 286 billion kWh next year, representing 75% growth.
Thus, customer demand will grow, benefiting Nextracker. According to Mordor Intelligence, the tracker market will expand at a 22.38% compounded annual growth rate between 2024 and 2029. Nextracker is the global leader with over 500 patents and its products have been shipped to over 30 countries.
Due to robust demand, revenue growth accelerated in every quarter last year. In Q2 FY2024 and Q3 FY2024, it was 23% and 38%, respectively. What’s more, it closed Q3 with a record backlog above $3 billion. For FY2024, management expects adjusted diluted EPS between $2.55 and $2.75. NXT stock is among the best growth stocks to buy in April at 20 times FY2024 EPS.
On the date of publication, Charles Munyi 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.
