There may still be some uncertainty over interest rates, but that shouldn’t stop you from considering high-quality growth stocks. For one, even as the Federal Reserve maintains a cautious stance regarding rate cuts as inflation continues to cool, rate cuts will stay a matter of “when,” not “if.”
Also, and more importantly, said uncertainty works to your advantage in two ways. First, because of the mixed sentiment out there, there are many names that fit well into the “growth at a reasonable price,” or GARP, category. These stocks have strong upside potential, both from the growth of the underlying business, plus the potential for a valuation re-rating, in the event sentiment shifts back to fully bullish.
Second, the current uncertainty has created an opportunity with some more speculative, yet promising, early-stage growth names. While these particular stocks are not cheap based on traditional valuation metrics, they may prove to be bargains in hindsight, as these upstarts embark on their respective liftoffs to profitability.
These seven growth stocks below fit into either of these categories.
Archer Aviation (ACHR)
Archer Aviation (NYSE:ACHR) is an electric vertical takeoff and landing aircraft startup. These eVTOL stocks, sometimes known as flying car stocks, “took off” in 2023, as investors became bullish about the long-term growth potential of the nascent air taxi industry.
More recently, however, names like ACHR stock have pulled back. However, while frustrating for existing shareholders, if you’re interested in entering a position today, this may work to your advantage. Even as shares have bounced back nearly threefold off their lows, you can still get in at the ground floor.
At today’s prices (under $5 per share), the stock remains far below its all-time high (over $16 per share). Archer could re-hit this high-water mark sooner than you may think. As the company continues to hit Federal Aviation Administration certification milestones approaching the commercialization stage, the next big “liftoff” could begin.
Shift4 Payments (FOUR)
If you are looking for reasonably priced growth stocks, Shift4 Payments (NYSE:FOUR) is a sound choice because of valuation. As I argued earlier this month, shares in this digital payments company are a bargain when compared to the company’s future growth prospects.
During 2024, earnings are expected to grow by around 31.25%, from $2.88 to $3.78 per share. FOUR stock trades for just 19.4 times this estimate. While factors like a rebound in consumer discretionary spending may help to explain such high levels of growth this year, don’t assume this is a “one and done” situation.
With the company focused on digital payments in areas like e-commerce and igaming, an elevated level of transaction volume, revenue, and earnings growth could carry on for years to come. Besides its organic growth bona fides, Shift4 Payments has been, and still could be, a takeover target.
Grab Holdings (GRAB)
Based in Singapore, Grab Holdings (NASDAQ:GRAB) could be best described as being Southeast Asia’s answer to Uber Technologies (NASDAQ:UBER), if Uber offered fintech services alongside delivery and rideshare services on its platform.
Last week, Grab Holdings released its latest quarterly results. While reporting strong results for the preceding quarter, investors were disappointed with the company’s 2024 revenue guidance. As a result, GRAB stock fell sharply (by 8.41%) on earnings day. However, this post-earnings slide could mean a solid entry point for a long-term position.
Why? Even as growth may slow down faster than previously-anticipated, Grab can make up for it in other ways. For instance, the company is now focused on maximizing profitability. This could cause an outsized jump in its bottom line. Grab has also announced plans to repurchase up to $500 million worth of shares, which also provide a lift for the stock.
Li Auto (LI)
There are many growth stocks in the electric vehicle space, but Li Auto (NASDAQ:LI) may be the best, with its appeal as an investment opportunity. I’ve talked glowingly about shares in this China-based EV maker for quite some time, most recently in early February.
In a nutshell, what makes LI stock appealing is its mix of good value and strong growth prospects.
In contrast to its U.S.-listed peers like Nio (NYSE:NIO), Li Auto is consistently profitable. At the same time, shares trade at a fairly reasonable valuation relative to growth.
While not for certain, the fact this company has focused on a particular niche (plug-in hybrid SUVs for the mass affluent market) may enable it to hit its ambitious 2024 vehicle deliveries target (more than double reported deliveries in 2023). If Li pulls this off, expect shares to really take off in price.
Nu Holdings (NU)
Nu Holding (NYSE:NU) is a fintech rising star in Central and South America. Shares of this Brazil-based digital banking institution have surged 114.5% in the past year as it expands into new markets.
But even after this impressive run-up in price, don’t assume NU stock is going to quickly slow down. The company just recently reported yet another quarter of strong growth.
Shares also trade for just 28.9 times forward earnings. This valuation is sustainable, given how earnings may jump by as much as 72.2% during 2025.
Even if NU doesn’t benefit from any additional expansion of its forward earnings multiple, shares could still climb in tandem with increased earnings. Resulting in another wave of big gains for this top-performing stock.
Shoals Technologies Group (SHLS)
If you’ve looking for growth stocks with exposure to solar proliferation, consider Shoals Technologies Group (NASDAQ:SHLS). Yes, shares in this provider of electrical balance of system products for solar and EV charging end users have experienced a big pullback over the past year.
In the last twelve months, SHLS stock has tumbled from the mid-$20s to the mid-teens per share. Yet while this solar stock, like other solar stocks, has fallen out of favor, as InvestorPlace’s Larry Ramer recently pointed out, Shoals has continued to report strong results.
During Q3 2023, Shoals reported revenue growth of 48%, EBITDA growth of 81%, and a 34% increase in its order backlog. Despite this high growth, however, shares are a relative bargain, trading for just 21.9 times forward earnings. If results remain strong, the market may decide to re-rate SHLS, even before solar stocks come back in vogue.
SoFi Technologies (SOFI)
The market doesn’t quite know what to make of SoFi Technologies (NASDAQ:SOFI). On one hand, neobank has continued to report elevated levels of revenue and adjusted EBITDA growth.
SoFi also just recently achieved GAAP profitability for the first time.
The market is unsure whether this high level of growth will continue. There’s also a debate over whether SOFI stock should be valued like other bank stocks, or like other fintech stocks. Yet while analysts and investors overall may have a mixed take on SoFi, as argued in past coverage, I have been, and remain, very bullish on its long-term prospects.
Mostly, because of the potential for SoFi’s earnings to grow at a rapid pace, thanks to operating leverage. Once profitability really takes off, the market could hop back into this $8 per share stock, resulting in a move back to double-digit price levels.
On the date of publication, Thomas Niel 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.
Financial, Bank, Consumer Discretionary, Automotive, Electric Vehicles, Fintech, Flying Cars, Energy, Renewable Energy, Solar, Technology
