As we prepare to ring in 2024, there is optimism that growth stocks could continue to rebound to greater highs next year. Interest rate cuts expected by April may benefit high-growth companies that had difficulty accessing capital last year.
Now is an opportune time to take a closer look at beaten-down growth stocks and consider adding a few to your portfolio before they potentially bounce back.
I have my eye on a handful of growth stocks on that trajectory. If the economic landscape develops favorably in 2024 without further shocks, a recovery in these stocks could provide substantial returns:
Moneylion (ML)
Moneylion (NYSE:ML) has been having impressive sales growth momentum. Revenue jumped 24% year-over-year in the latest quarter.
With consumers and investors returning to fintech in droves, this high-octane growth stock appears poised for massive gains after plummeting over 80% from its post-IPO peak.
Despite towering over 450% from its trough, Moneylion still looks attractively valued. The current market cap is just 1.5 times the expected 2023 revenue, which is forecasted to climb a robust 27.5%. Analysts also see 20% annual top-line expansion in the cards for the years ahead.
Although profitability remains elusive for now, substantial reductions in net losses this year signal an inflection point could be coming soon.
Losses in the first nine months of 2023 were $47 million, lower than the $189 million in losses for all of 2022. The model predicts profits by 2025. The risk-reward ratio heavily favors the bull thesis due to a $94 million cash position.
Toast (TOST)
As a restaurant point-of-sale and management software leader, Toast (NYSE:TOST) exemplifies an ideal pick-and-shovel play on accelerating digital transformation trends in the food services industry.
Online ordering, delivery tracking, and reporting capabilities are increasingly becoming competitive necessities, and this company’s platform offers indispensable tools for restaurants aiming to thrive in the 2020s.
Toast has maintained incredible sales momentum since 2021. Consensus forecasts call for revenue growth of nearly 41% in 2023 and 26% next year, with analysts modeling around 15% annual expansion over the next decade. After reporting losses substantially in recent quarters, Toast appears on track to reach profitability this year.
Cash burn has already turned positive over the past two quarters. With rock-solid liquidity, including over $1 billion of cash versus negligible debt, Toast possesses one of the most durable balance sheets among high-growth disruptors.
Given the long runway for digital penetration in restaurants, I believe Toast trades at a substantial discount. This remains a long-term winner in my book.
NetEase (NTES)
NetEase (NASDAQ:NTES) has confronted regulatory headwinds over the past 18 months that have rattled investors. And while recent draft gaming legislation sparked additional panic selling last month, Mr. Market overreacted.
NetEase’s business appears well-positioned to withstand incremental restrictions beyond the significant curbs already absorbed over the past year.
While the latest proposed rules around daily login frequency and rewards clearly present some risk, NetEase has already endured the worst of the crackdown. Authorities are softening their stance marginally, given pressures on the domestic gaming economy.
With the stock trading below $90, much of this risk looks fully priced in through the 34% peak-to-trough drawdown.
Meanwhile, NetEase has returned to growth despite the regulatory overhang, with revenues rising 9% year-over-year last quarter.
Margin expansion has accompanied the top-line momentum as well. And with a 2% dividend yield adding income during this period of depressed valuation, I see the current risk-reward skew favoring bulls again.
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.
