Analysts regularly adjust their price targets after earnings and in light of news developments. These individuals and their firms regularly stay on top of individual stocks, sectors and the broader economy. Analysts have more time and expertise in stock investing than the average investor, which is what makes it good to consider what they say.
Granted, you should conduct some of your own due diligence instead of solely relying on an analyst’s insights. However, these seven growth stocks look like they have more catalysts left that can spark future gains. Capitalizing on these “Strong Buy” stocks during dips can lead to attractive long-term returns. Discover the investment opportunities that are likely to rally in the future.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has outpaced the stock market for several years. The company’s stock is up by 9% year-to-date and has almost tripled over the past five years. A recent stock correction has raised the yield to 0.74% while resulting in a 34.5x P/E ratio.
The tech giant is a top beneficiary of the AI boom on the software side. Copilot allows Microsoft to tap into more verticals and expand its presence. For instance, Copilot for Security expanded the company’s market share in the cybersecurity industry. Microsoft’s Q4 FY24 revenue and net income growth rates decelerated a bit but still came in at healthy levels. Revenue increased by 15% YoY to reach $53.7 billion while net income was up by 10% YoY.
Microsoft Cloud continues to be a critical component of the company’s long-term plans. Cloud revenue increased by 21% YoY to reach a record $36.8 billion. The conglomerate also reported impressive growth rates in other business segments, such as Productivity and Business Processes.
Meta (META)
Meta (NASDAQ:META) makes almost all of its revenue from online advertisements. The company is diversifying into other revenue streams like augmented reality and AI. While those opportunities can eventually pan out in meaningful ways, the company’s underlying business model continues to excel.
Facebook’s parent company reported 22% YoY revenue growth and 73% YoY net income growth in the second quarter. The company has 3.27 billion daily active users across its social networks which is a 7% YoY increase. As more people flock to Meta’s family of apps, advertisers get more opportunities to showcase their businesses. That also means more revenue for Meta.
Headcount remained stable, only down by 1% YoY. It’s a notable achievement, given the company’s ability to still generate 73% YoY revenue growth. Meta has become more efficient, and it’s been able to give out quarterly dividends to its investors. The tech giant also invests billions of dollars into stock buybacks each quarter, further raising the stock price.
American Express (AXP)
American Express (NYSE:AXP) offers a good blend of value and growth. The stock trades at an 18x P/E ratio and offers a 1.18% yield. Shares are up by 26% year-to-date and have gained 89% over the past five years. The fintech firm benefits from rising revenue and profit margins as younger consumers create new cards with the company.
Revenue increased by 9% YoY in the second quarter while net income jumped by 39% YoY. Revenue has been in the high single-digits or low double-digits for several quarters, and net income has often outpaced it. American Express closed out the quarter with a 20% net profit margin. Guidance suggests that profit margins will continue to expand.
Consumers will use their credit and debit cards in any economy. These cards are more convenient and secure than paper cash, and many of them also have enticing reward programs. American Express is a leading credit and debit card issuer that offers a reasonable valuation and promising growth prospects.
Broadcom (AVGO)
The AI chipmaker stands to benefit from a potential partnership with OpenAI that can boost its sales. However, Broadcom (NASDAQ:AVGO) isn’t relying on OpenAI to succeed in the booming artificial intelligence industry. The company generated a record $3.1 billion from its AI products in Q2 FY24 in an effort that resulted in 43% YOY revenue growth across the company. The VMware acquisition has been a boon for Broadcom’s infrastructure software solutions.
The stock has been a consistent outperformer before artificial intelligence become mainstream. Shares are up by 37% year-to-date and have more than quintupled over the past five years. Broadcom also offers a 1.42% yield and has maintained an annualized double-digit dividend growth rate for several years.
A recent 10-for-1 stock split brought more attention to Broadcom, but shares are now in a correction. This opportunity looks promising for long-term investors are Broadcom gets closer to a $1 trillion valuation.
Chipotle (CMG)
Broadcom isn’t the only corporation that initiated a stock split. In fact, it seems like stock splits are making a comeback, with Chipotle (NYSE:CMG) leading the way. The fast food restaurant chain announced a 50-for-1 stock split earlier in the year. The split brought more attention to the stock, but shares are currently in the middle of a correction.
Many fast food restaurants and consumer discretionary companies have faced pushback from higher prices. However, Chipotle defied industry headwinds by reporting 18.2% YoY revenue growth in the second quarter. Even better, the Mexican Grill chain reported 33% YoY net income growth, resulting in a 15.3% net profit margin.
Chipotle has been no stranger to price hikes, but it is a healthier alternative to many fast food restaurants. The company’s reputation for offering quality food relative to its competitors has given it more pricing power. That should please investors, on top of the stock’s 240% gain over the past five years.
Walmart (WMT)
Walmart (NYSE:WMT) has a sprawling presence that includes more than 10,500 stores and clubs in 19 countries. The company has almost half of its stores located in the U.S. and has 2.1 million employees. Walmart stock has outpaced the stock market with a 28% year-to-date gain. Furthermore, shares are up by 90% over the past five years and offer a 1.22% yield. The stock trades at a 29x P/E ratio.
The company’s Q1 FY25 results suggest that the gains should continue. Consolidated revenue increased by 6.0% YoY to reach $61.5 billion. Meanwhile, net income more than tripled YoY to reach $5.1 billion, resulting in a 3.16% net profit margin.
E-commerce sales growth was a major highlight, delivering a 21% YoY increase in sales. Walmart’s advertising segment also did well, generating 24% more revenue than the same quarter last year. Ads only make up a small percentage of Walmart’s total revenue, but this segment can improve the company’s profit margins.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has been the AI leader for several years and made it on every investor’s radar in 2023. It’s hard to ignore a stock that has more than doubled year-to-date that has logged a 2,621% gain over the past five years. However, investors still believe that Nvidia can continue to rally. It was briefly the world’s most valuable company and may reclaim that title within a few years.
The AI chipmaker’s revenue and net income continue to surge at levels that other mega-caps can’t compete with. Sales increased by 262% YoY to reach $26 billion, while net income surged by 628% YOY. Nvidia’s profit margins have accelerated dramatically over the past year and came in at 57.1% in Q1 FY25.
The artificial intelligence is projected to maintain a compounded annualized growth rate of 36.6% from now until 2030. There’s already speculation that Nvidia’s next earnings report will be a smash hit that acts as the next big AI catalyst. Investors are excited about Nvidia stock, and the corporation has earned the enthusiasm of its analysts. Nvidia can soar to all-time highs if it reports good results for Q2 FY25.
On this date of publication, Marc Guberti held long positions in MSFT, AVGO, and NVDA. 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.
Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.