The 2020s have been a rollercoaster so far, and who knows what the next ten years could hold for us. However, if we narrow the lens down to just the stock market, it’s been nothing but stellar for the past year and a half.
Also, the coming years look rosy, at least according to the bulls. Most bulls argue that we already had a soft landing and that the Federal Reserve’s rate cuts will give the pandemic’s ripple effects a happy ending.
Bears will tell you to hunker down in defensive names or even flee. They see the writing on the wall for growth stocks. In their view, a repeat of the Dot-Com Bust is inevitable.
There’s some truth to both sides since the labor market is strong, and artificial intelligence (AI) is contributing to efficiency. On the other hand, rate cuts have aligned with previous recessions.
Regardless, growth stocks are unlikely to disappoint you if you hold them for a decade. They may take a hit in the near term if we enter a recession. However, history has shown that it’s not worth timing the market, and it’s much better to buy and hold. Thus, let’s explore seven solid growth stocks to buy and hold for the next decade.
PDD Holdings (PDD)
PDD Holdings (NASDAQ:PDD) still has significant room to run, with its international app Temu taking the America by storm. It was the most downloaded app since Q1 of 2023 and now boasts over 100 million active users in the U.S. alone. With its ultra-low prices, Temu is unlikely to turn away cost-conscious consumers anytime soon.
However, Temu is just one growth engine for PDD. The company’s core Pinduoduo app continues to thrive in China. Analysts are incredibly bullish.
Recently, PDD upgraded their 2024 revenue and earnings estimates. Despite having much stronger fundamentals, the stock trades at just 12 times forward earnings, nearly a 50% discount to the Nasdaq 100.
Of course, risks are possible. Escalating U.S.-China tensions and potential tariffs could create headwinds. However, with a foothold in the massive Chinese market and an expanding global presence, I believe PDD is well-positioned for the long haul.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) is riding the AI wave, and investors are taking notice. The company reported blowout earnings last quarter, with revenue surging 200% year-over-year (YOY) to $3.85 billion. Net income skyrocketed 367% to $402.5 million. This growth is driven not only by AI but also by advanced technologies like cloud computing and edge computing.
Moreover, Super Micro Computer is among the most promising and profitable AI plays for early investors. The stock has more than tripled year-to-date (YTD). SMCI is a key beneficiary of the AI boom as a critical server technology supplier to data centers. Some analysts even view it as an ‘AI proxy’ that could attract investors if enthusiasm for Nvidia (NASDAQ:NVDA) starts to wane.
Despite the huge run-up, the stock still appears cheap compared to high-flying software names. Super Micro Computer trades at 38 times forward earnings, a bargain considering its triple-digit growth. Of course, the data center industry is cyclical and competitive, so growth projections are more uncertain. But if the AI megatrend has legs, as I believe it does, Super Micro Computer could be a core holding for the next decade-plus.
Wall Street is largely bullish, with a consensus price target of $1,066. Wells Fargo, Goldman Sachs and Wedbush all have targets around $830-$890. However, some analysts caution the stock is priced for perfection after the massive rally.
Therefore, Super Micro Computer will likely continue to be a battleground stock. But given its pole position in the AI hardware race, it’s definitely worth having some exposure to.
Datadog (DDOG)
Datadog (NASDAQ:DDOG) is riding high on the cloud computing and data boom megatrends. Recently, the company reported stellar Q1 of 2024 results, with revenue up 27% YOY to $611 million. Also, Datadog is seeing strong growth in large customers, with those spending over $100,000 annually increasing 15% to about 3,340.
While most of the AI hype is focused on hardware players like Nvidia, Datadog provides exposure to AI software trends without investing in risky startups or just the Big Tech giants.
Analysts remain bullish on Datadog. Morgan Stanley reiterated an overweight rating, citing the company’s ability to gain market share and deliver attractive profit margins. The stock has surged over 20% in the year, though at a $42 billion market cap, Datadog trades at a steep valuation.
Of course, I’m optimistic about Datadog’s prospects. Exercise some caution though, given the lofty expectations baked into the stock price. However, as long as organizations continue rapidly adopting cloud computing, Datadog is poised to be a prime beneficiary.
Duolingo (DUOL)
Duolingo (NASDAQ:DUOL) is riding several powerful megatrends that could position the company for future robust growth. In Q1 of 2024, Duolingo delivered impressive results, with revenue increasing 45% YOY to $167.6 million and adjusted EBITDA nearly tripling. This beat expectations, though the stock still dropped 15% after the report.
I’m optimistic about Duolingo’s prospects. Globalization and widespread internet access are fueling people’s desire to learn about different cultures and connect with the world. Nowhere is this more evident than in developed countries. At the same time, high levels of immigration into the U.S. and Western nations are driving demand for language learning software. In Sweden, for instance, Duolingo has become the go-to place for migrants learning Swedish.
As these trends accelerate, the global language-learning market is projected to reach $115 billion by 2025. It currently has less than 1% market share, so Duolingo has a massive runway for growth. Analysts seem to agree, with the average rating on the stock at moderate buy.
In addition, Duolingo’s fundamentals look solid. Daily active users jumped 54% last quarter as the product resonates with learners. Revenue from subscriptions are also compounding fast.
With a powerful flywheel effect of product improvements fueling user growth and vice versa, expect Duolingo to sustain its momentum.
Bandwidth Inc (BAND)
Communications platform company Bandwidth Inc (NASDAQ:BAND) could be poised for a major recovery in the coming years. The company reported impressive first-quarter 2024 results, with revenue increasing 24% YOY to $171 million. Moreover, management raised their full-year outlook, now expecting $715 million in revenue at the midpoint. Analysts expect its financials to rise sharply in the coming years.
Bandwidth Inc. is still unprofitable on a GAAP basis and is saddled with a hefty $643.8 million debt load. Nevertheless, I see plenty of reasons for optimism. The company is riding several powerful megatrends in the CPaaS (communications platform as a service) market, which is projected to soar from $12.5 billion in 2022 to $45.3 billion by 2027.
Granted, this is a speculative pick for now. The stock has been hammered, plunging from a peak of nearly $190 in 2021 to about $10 last year, though shares have rebounded to $18 as of writing.
Once the Federal Reserve starts cutting interest rates, Bandwidth’s growth will really start to shine through to the bottom line. It has $147 million in cash and can handle the losses until rates come down and take off the interest expense burden. It’s worth looking into if you like risk.
Paycom Software (PAYC)
Paycom Software (NYSE:PAYC) has been on my radar lately, and for good reason.
Despite the stock being down 58.6% over the past year, the company continues to post impressive double-digit revenue growth and rising profits. In their recent Q1 of 2024 earnings report, PAYC delivered revenue of $500 million, up 11% YOY, and adjusted EBITDA of $230 million. While growth has slowed compared to historical levels, I believe the market is underestimating Paycom Software’s long-term potential.
PAYC’s software named Beti allows employees to do their own payroll, and the company is streamlining HR workflows and driving significant ROI for clients. As more businesses rush automation and self-service, expect demand for Paycom’s offerings to accelerate.
Admittedly, analyst opinions on PAYC are mixed, but it is a good buy at current valuations.
Block Inc. (SQ)
The market has been far too pessimistic on Block Inc. (NYSE:SQ). While the stock is still well off its highs, the fundamentals paint a picture of a company firing on all cylinders. Block Inc. is capitalizing on major fintech megatrends such as digital payments, e-commerce and crypto. Cash App continues to be a growth engine, with inflows per active up 11% in Q1. And the Afterpay acquisition is already bearing fruit, as evidenced by the 25% increase in BNPL gross merchandise value.
Its Q1 of 2024 earnings report beat expectations on both the top and bottom lines. Revenue is up 19.4% YOY to nearly $6 billion, while EPS of 85 cents trounced estimates by 12 cents.
Looking ahead, analysts are overwhelmingly bullish, with 24 buy ratings versus just one sell. The consensus price target of $89 implies nearly 40% upside from current levels. It’s not hard to see why, considering EPS is projected to quadruple over the next decade while revenue could double from 2024 to 2030.
As long as Block Inc. keeps executing, I expect the stock to make a sharp move higher, especially once interest rates start coming down.
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.
