Growth stocks have been driving the market for most of its history, but the trends have only accelerated recently. Investors are willing to slap a higher and higher premium on these growth stocks as long as they can beat earnings and keep their growth figures high. Certain growth stocks currently trade at 15-20 times forward sales, and many believe they could go even higher.
That said, there are many growth stocks in the market right now that barely trade at a premium. This is mostly due to profitability issues or short-term pains. I believe it is worth looking into some of these companies as many of them have what it takes to make it out of the storm and have the cash on hand to cover losses until profitable. If and when these companies turn into profitable growth plays, I believe Wall Street will slap a much higher premium on them and drive multibagger rallies.
Here are seven such growth stocks to look into:
Ouster (OUST)
Ouster (NYSE:OUST) is a leading developer of high-resolution digital lidar sensors. I’m very bullish on the long-term potential of lidar technology, but unfortunately, most companies in the space are quite unprofitable and burning massive amounts of cash. The EV sector has been hit hard recently, and many companies that supply the industry have also cratered.
However, Ouster is bucking this trend. In Q1 2024, they reported record revenue of $26 million, up 51% year-over-year. This exceeded an impressive $100 million annualized run rate for the first time. Ouster’s relentless execution is paying off as customers rapidly adopt their cutting-edge REV7 sensors, driving gross margins to a record 36%.
Moreover, Ouster has been winning in huge markets like logistics. They’re barely scratching the surface of multi-billion dollar opportunities. In agriculture alone, just a 1% penetration of the 2 million tractors sold annually would mean 40,000 sensors – nearly triple Ouster’s entire 2023 sensor sales!
With robotics also requiring lots of lidar, I believe Ouster can weather this storm and come out even stronger, especially as rate cuts provide a major tailwind. Keep a close eye on this emerging lidar leader.
Archer Aviation (ACHR)
Archer Aviation (NYSE:ACHR) is making electric vertical takeoff and landing (eVTOL) aircraft for urban air mobility. The company is laser-focused on commercializing its flagship Midnight aircraft, with plans to launch in 2025.
Archer is making steady progress on its certification and flight testing programs. The company had over 100 flights logged in Q1 alone, and they’re on track to exceed their goal of 400 flights this year. The fact that they’re already investing in automated battery pack manufacturing gives me a lot of optimism.
The industry is still very new, but I think it’s wise for growth-oriented investors to gain some exposure to this space. Governments worldwide seem increasingly supportive of this transformative technology, recognizing its potential to alleviate urban congestion. Archer’s stock has already recovered 22% in the past month and could have more runway ahead as they near commercial launch.
Although the path to profitability is uncertain, I believe the risk-reward profile for Archer is skewed favorably at current valuations.
Bandwidth (BAND)
Bandwidth (NASDAQ:BAND) is a communications platform-as-a-service (CPaaS) company that provides cloud-based software to integrate voice and text into applications. I believe Bandwidth has intriguing long-term growth potential that investors shouldn’t overlook.
In Q1 2024, Bandwidth posted impressive results, exceeding guidance with record quarterly revenue of $171 million, up 24% YOY. Cloud communications revenue also grew at a healthy 12% clip. Notably, the company achieved its highest-ever Q1 adjusted EBITDA at $16 million, skyrocketing 215% from the prior year. Management raised full-year 2024 guidance on the back of this outperformance. I believe increasing profitability could lead to the stock price breaking out in the coming months.
While the stock has climbed 28% over the past year, I argue Bandwidth’s growth story is still in its early innings. Analysts project earnings per share could double within the next two years alone. Plus, they recently purchased $140 million in convertible notes and have $100 million in fresh revolving credit and enough cash reserves.
EHang (EH)
EHang (NASDAQ:EH) is a Chinese company pioneering electric vertical takeoff and landing (eVTOL) vehicles for short-to-medium range air transportation. Looking at EHang’s Q1 2024 earnings, I’m seeing all the indications that this could be a high-risk, high-reward play that’s worth considering for long-term investors.
Most investors run for the hills at the mere mention of the flying car industry, let alone a Chinese flying car stock. However, this widespread pessimism is precisely what makes EHang worth looking into. The company’s Q1 revenues rose 178% YOY to RMB 61.7 million, driven by a record 27 units of its flagship EH216 series eVTOL delivered. This represents EHang’s highest-ever quarterly deliveries.
What’s more, the Chinese government has been rolling out supportive policies for the low-altitude economy, with a target market size of trillions of RMB by 2030. Nearly 30 provincial and municipal governments in China have launched their own development plans. I believe EHang will continue benefiting from tax breaks, subsidies, and regulatory support as China aims to capture the lion’s share of the global flying car market.
Granted, investing in pre-profit companies always carries elevated risks. However, the biggest positive is that EHang is expected to turn profitable next year. If the company can execute on its first-mover advantage and rapidly grow its top line, we could be looking at a future flying car titan in the making.
StoneCo (STNE)
StoneCo (NASDAQ:STNE) is a leading Brazilian fintech company providing payment processing and banking solutions. Despite the stock being battered along with the broader fintech sector, I believe the company’s long-term outlook remains compelling.
In Q1 2024, StoneCo continued to deliver robust growth, with total payment volume (TPV) increasing strongly YOY to nearly match the holiday shopping levels from Q4 2023. The company also made promising strides in its banking initiatives, with approximately 80% of active clients now using StoneCo’s bundled banking and payment solutions. This expanding ecosystem engagement positions StoneCo well to deepen client relationships and drive stickier revenues over time.
Plus, ongoing rate cuts in Brazil are going to help massively narrow that net interest loss.
While enterprise software remains a drag on overall software segment growth, core vertical software offerings still delivered 12% growth. It is trading at a dirt-cheap 10 times forward earnings right now. Thus, StoneCo’s valuation seems to be pricing in an excessively dour scenario, especially considering Brazil’s aggressive rate-cutting cycle is already reaccelerating fintech fundamentals. With projected 30%+ net income CAGR through 2027 and structural efficiencies kicking in, I believe StoneCo offers solid long-term upside.
Upstart (UPST)
Upstart (NASDAQ:UPST) is an AI lending platform. The current high interest rate environment has been a major headwind, substantially reducing borrowing activity and Upstart’s transaction volumes. However, I believe the tide is starting to turn. The Fed has signaled that its rate hike campaign is nearing an end, with potential rate cuts on the horizon in the coming months.
As borrowing costs come down, consumer loan demand should rebound significantly. I expect this to drive a strong resurgence in Upstart’s business as more banks and credit unions flock to its industry-leading AI underwriting models to capture this revived loan growth. While Upstart’s recent woes are largely tied to economic factors outside its control, I’m confident that its superior tech will prove a major draw for lenders as conditions normalize.
The company’s current valuation looks highly attractive, given Upstart’s immense earnings growth potential. Its revenue is projected to nearly triple from 2024 to 2028
CRISPR Therapeutics (CRSP)
CRISPR Therapeutics (NASDAQ:CRSP) is a leading gene-editing company that is developing game-changing treatments. I believe this stock is one of the most compelling long-term bets you can make right now if you have the conviction that CRISPR gene editing will transform medicine. While I’m usually cautious about speculative biotech investments, CRISPR’s $2.1 billion cash position provides a vital cushion to absorb future operating losses until profitability.
The recent FDA approval of their groundbreaking exa-cel treatment for sickle cell disease and beta-thalassemia could be just the tip of the iceberg. With over 30,000 sickle cell and 5,000 transfusion-dependent beta-thalassemia patients in the U.S. and Europe alone, I see massive revenue potential.
Regardless, CRISPR’s opportunity extends far beyond exa-cel. Their pipeline spans immuno-oncology, regenerative medicine, and in vivo treatments, providing multiple shots on goal just like one of the best growth stocks should.
On the date of publication, Omor Ibne Ehsan 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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
Biotech, Cloud, Consumer Discretionary, Automotive, Electric Vehicles, Financial, Fintech, Flying Cars, Healthcare, Software, Technology
